World Fintech Report 2019 Info-slides + Summary
Original creator : Capgemini Research - Summary by Concis
Introduction
Capgemini’s World Fintech Report 2019 outlines a major transition from the world of Open Banking to an ecosystem driven evolution in banking called Open X.
The key characteristics of this phase are seamless exchange of information and resources, enhanced customer experience and next level product innovation.
Key Takeaways
Increased collaboration among players will lead to rebundling of product and services due to convenient and dynamic platforms. Thus, provider of any one service is likely to become less critical than a banks’ ability to control user touchpoints to deliver superior CX for acquisition and retention.
The open ecosystem will lead players to strategically align themselves as per their core ability (specialization) to act primarily as a Supplier, Aggregator, or Orchestrator.
Collaboration among financial players such as incumbent banks, fintechs, third party service providers and policy makers will be the key to overcoming system uncertainties such as ambiguity around process standardization, regulations, and entity roles.
The Four pillars of Open X
Traditionally firms have focused on tactics such as monetization of APIs. Under Open X, strategy and transformation take precedence over tactics as first movers will have the ability to define ecosystem roles, standards, and its management.
CX takes precedence: Till date, the financial services industry has primarily focused on customer centricity by improving external interfaces instead of transformation of entire customer journey. Open X will require firms to provide personalized choices at individual customer level, higher transparency, and a seamless experience not just products.
Data becomes critical asset: Merely holding or storing data is not enough. Players will likely partner with technology experts to leverage emerging technologies to differentiate and monetize their most significant asset.
Firms will partner instead of developing and purchasing capabilities: Firms today are focused almost entirely on enhancing front-end. In Open X, ecosystem players will leverage third-party specialists to augment the operational middle layer and back-end instead of building internal or purchasing such capabilities.
Shift from ownership to shared access: Survival in the Open X environment will be contingent on a distinguished value proposition to position the firm as a leader. The core offering or specialization will be complemented by leveraging other participants services to complete the customer journey.
APIs will hold the key to collaboration and monetization strategies
With increased API acceptance, players must embrace standardized APIs to reduce fraud, and improve interoperability and scalability. Firms leading the standardization initiative will have a tremendous first-mover advantage by avoiding further disruption to transformation of their technology to match new standards.
Open X will enable better value via Indirect API monetization:
Direct models (income tied to a specific transaction)
Revenue sharing: API provider shares digital asset with a third party, and generated revenue is shared
API access fee: API provider charging fees per transaction, per call, or access as part of a subscription.
Indirect models (additional revenue opportunities)
Referred business/sales leads: An entity expands its distribution channels by integrating with partners.
Brand uplift/product promotion: Advertisements or associations position a firm’s brand.
Actionable data from insights: Collection and sharing of insights such as purchasing decisions, loan needs or risk profiles.
The real value in Open X lies with indirect models such as referred business and actionable insights helping firms expand distribution channels and improve experience.
Structured collaboration – the secret sauce to Open X
Despite increased collaboration amongst banks and FinTech’s both have struggled to scale efficiently. Key points to consider before embarking on a new partnership:
People: Successful collaborations have a mix of people with strong business acumen and deep technical expertise.
Finance: A defined investment and revenue model leads to a compelling value proposition. Participants need adequate capital and a proven revenue model to maintain positive cash flow.
Business: Early traction, a proven business model, customer adoption, and value creation comprise the foundation of any potential collaboration. The partnership should produce a value proposition with quantifiable results.
Technology: Should be secure, scalable with current systems and enable frictionless collaboration. Accessed information must be accurate, timely, and regulatory compliant (GDPR etc.).
The new roles in the future ecosystem (Open X)
The new roles are not business-model exclusive, but business-case specific.
Integrated (traditional role): A firm maintains full control over its product and service – as well as distribution. In Open X, such players will struggle to match competitors’ time to market and lack the agility to meet evolving customer demands.
Supplier: These players develop products and services, leaving distribution to a third-party or external player.
Aggregator: Such players delegate product and service creation to a third party or external players but uses its internal channels for distribution.
Orchestrator: This central entity unites the ecosystem by connecting and coordinating their interactions to create maximum value. The role orchestrates Suppliers and Aggregators interactions.
Conclusion
Although the transition from open banking to Open X has begun but a few are taking the required bold initial steps. Majority of players remain oblivious to potential threats and opportunities. Service providers need to ask themselves tough questions to figure out where the next battleground is. Some questions to help unlock maximum value:
What are the firm’s core strengths?
With whom will the firm collaborate to support non-core areas?
Does the firm have the required technology/ technical capability to capitalize on open banking and Open X opportunities?