Even before the digital age, post-crisis Europe was burdened with excess banking capacity. Digitalisation is making this situation worse – even if Open Banking and its subsets – Banking-as-a-Service (BaaS), Banking-as-a-Platform (BaaP) and Embedded Finance – are not purposely designed to bypass banks.

What these new digital services are designed to do is to push banks towards the new transparent, open and interactive world. The challenge today is about repositioning incumbent banks as players in the new ecosystem to compete for customers’ financial needs and data with other participants; banks and non-banks alike. And replacing traditional delivery and decision-making channels with APIs, and of migrating back offices and data storage to the cloud.

Incumbent banks that are technologically well equipped should welcome and embrace this new world. There are clear revenue opportunities in the early adoption of the Open-Banking environment, for example from BaaS/BaaP-related fees and commissions. Partnering with non-financial businesses can broaden a bank’s footprint and place customer relationship on a trajectory better adapted to the new dynamics.

Read the full report by Sam Theodore.