Open Banking, Going BACK(?!) to the Future

Open Banking and innovation

When you think Open Banking and new possibilities for start-ups to innovate with new product concepts build around Open APIs, the saying “everything old is new again” isn’t exactly what comes to mind.

But that’s precisely what one UK start-up has done with their “One Bank for All” innovation where they’re turning back the clock (a few decades, if not a century) to the nostalgic days of bricks-and-mortar banking branches for in-person deposits and cash withdrawals and payments all done with a human teller face-to-face (interesting choice given the current pandemic but then again we are post-UK “Freedom Day!”). The idea is to use Open Banking to support customers from all banks.

This is quite interesting as it’s going full circle when you look at the evolution of banking in general and how it has transformed over the past 100 years into Open Banking.

The bricks-and-mortar bank teller was essentially replaced by ATMs (Automated Teller Machines for younger readers).

Contactless payments with Apple Pay, Google Pay, PayWave and PayPass will inevitably replace cash which in turn would make ATMs obsolete for cash withdrawals.

The adoption of Internet Banking and Mobile Banking was the final nail in the coffin for the old bricks-and-mortar bank branches.

One step further

Open Banking took it a step further to open up online banking so that third party providers could offer new online products using open access to the customer’s account data and in some jurisdictions enabled payments to be initiated on the customer.

The idea was for Open Banking to provide the end customer with competitive product offers and new product concepts that pre-Open Banking would simply have not been possible.

Little did they [the good folks that gave us Open Banking] anticipate that one of the new product concepts would be to re-introduce the bricks-and-mortar banking experience that they’ve been trying to get rid of over the past 40 years.

It will be interesting to see how this will go and if it will be adopted in other places – particularly in the context of the pandemic and social distancing where face-to-face is largely avoided.

I suspect it will come down to people and their preferences for doing their banking ‘in person’ – which might be a gap that’s been neglected in certain customer segments and in regional areas where the local town branch no longer exists.

There is potential in this use of Open Banking and what it’s trying to do – perhaps a bigger play in creating a ‘super bank’ that aggregates accounts across multiple banks and acts as an agent for all banks – “One Bank for All” indeed.

Snapshot of Banking evolution…

1600s – All banking services offered face-to-face and in-person. The bank issued a passbook and customers used deposit and withdrawal paper slips.

1950s — The introduction of Cheques Books.

1960s — Electronic Fund Transfers eventually displaced cheques.

1970s — The introduction of Credit Cards.

1980s — The introduction of ATMs meant customers didn’t need to go into a branch to withdraw money.

2000s — Adoption of Internet Banking introduced meant customers didn’t need to go into a branch for basic services.

2010s — Adoption of Mobile Banking and Apple/Google Pay meant a customer not only didn’t need to go into a branch but no longer needed cash and could complete all payments using the mobile phone.

2020s — Open Banking meant that financial institutions opened up access to their customers’ account data and in some jurisdictions enabled payments to be initiated on the customer’s behalf by Third Party Providers.