A guest article by Dr. Peter Robejsek, Vice-President at Mastercard.
Benefiting from new technologies and driven by the PSD2 payment services directive, the number of Open Banking use cases in Germany is continuously increasing. After all, open banking offers enormous opportunities to enable innovation not only through traditional products and services, but also to substantially expand one’s own business model with new partners and ecosystems.
In the meantime, all banks and savings banks have established solutions that allow third parties to access account information with the customers’ consent. The quality of the interfaces will also be further improved. At the same time, the growing demand for Open Banking services is increasing the load on exposed APIs, and the need for well-established processes for account-holding institutions with regard to data security is also increasing as the number of third-party providers accessing them grows. But increasing performance requirements also increase the need to find monetizable Open Banking services to gradually return the investment.
But is Germany ready for the Open Banking Revolution? Mastercard has investigated this question and analysed the current development in Germany as well as consumers’ willingness to pay for open banking services in Germany. The results were summarized in a two-part white paper.
Smart solutions in demand
Banks and savings banks enjoy a high level of trust among their customers – an important factor for sharing data. But they need to increase their pace of innovation to consistently capitalize on this advantage and tap into new sources of revenue. Cooperation is the be-all and end-all when it comes to defending or successfully conquering the customer interface in open banking. Financial institutions that succeed in developing innovative services can secure important advantages in the battle for customers.
After all, customers have a clear idea of what they expect from their credit institution. Even though only about 10 percent can relate to the term “open banking,” consumers have a clear idea of what they want. They expect the user experience they have come to know and appreciate from online retailing from their bank as well. They naturally assume that the bank is oriented towards their digital world and develops new services with tangible added value. This shift to digital channels has been accelerated once again by the Corona pandemic. And: Once the concrete added values are understood, the customers also demonstrate the demand for them. The availability of Open Banking services even influences the willingness to change the main bank connection.
Two-thirds of consumers are willing to pay for Open Banking services
But is the customer also willing to pay for Open Banking services? Mastercard’s analysis in cooperation with the LINK Institute shows that bank customers have very different preferences.
The good news is that two-thirds of respondents are generally willing to pay for Open Banking services. The highest willingness to pay is shown for actively selected features. That is, if you want to realize pioneer gains and attract new customers, you should develop new features and bundle them skillfully. The more precisely the interested customer group can be addressed, the sooner new digital offers can be monetized.
“If you want to realize pioneer gains and attract new customers, you should develop new features and bundle them cleverly.”
For this to succeed, financial institutions should focus particularly on younger and more affluent consumers – arguably one of the most attractive customer groups there is. It is precisely these customers who are currently the most willing to pay for Open Banking services.
Open Banking as the key to success
Those who recognize this potential of an open infrastructure and position themselves in a highly competitive market with an individual open banking strategy will benefit from competitive advantages and – if the offering is relevant and launched at the right time – from additional sources of revenue. Account-holding institutions that act too slowly or not at all expose themselves to the risk of losing or not being able to win attractive customer segments. In other words, a purely compliance-driven strategy will not lead to success.
Ultimately, the success of Open Banking will depend on users – whether retail or business – being willing to share their financial data. Safety is the decisive factor here. Banks have a big responsibility here and need to protect themselves from unauthorized third parties.
ensure safety
To help ASPSPs (Account Servicing Payment Service Providers) simplify third-party verification and reduce complexity, Mastercard has developed Open Banking Protect and is investing €1 million over the next 12 months to provide free trial access to its issuing customers in Germany.
The platform enables account-holding institutions to quickly and easily check the eligibility and regulatory license status of third-party vendors seeking to access customer data with a single connection. This is not a trivial task due to the large number of national registers that are not networked and in some cases cannot be read by machine – especially not in real time. As part of the platform, Mastercard is designing additional monitoring and alert systems that will help to quickly identify and stop discrepancies and fraudulent requests.
Download whitepaper now
Download Mastercard’s free whitepaper now and learn about new monetization opportunities in Open Banking.
