US vs Europe: 2 visions of Open Banking and their impact on the market structure. Its crazy when you think about what you’ve heard since childhood “do not share your banking password with anyone” along with “do not get in the car with strangers”. The 2 main differences between US and EU OB. Popularity: Today, open banking in the US market isn’t widespread across all actors of the financial services ecosystem. Some banks may choose to open their gates and meet the customers where they are, when some others may not, which makes it more difficult to connect to a wider number of financial institutions and increases the barriers to entry in the space, as connections are not systematic. Homogeneity: While some connections happen through secure APIs, with Tier 1 hashtagbanks like JP Morgan and Citibank leading the way, (many) others still rely on password sharing and screen scraping. This creates a differentiation in the value of the connections aggregators have built over time. hashtagAPIs connections are more valuable than password sharing since they are more secure and reliable. https://lnkd.in/gRscWqJ hashtagopenbanking hashtagbanking hashtagpayments hashtagfintech hashtagbankingtrends hashtagfinancialinclusion
Sorry but I disagree. US-style open banking is WAY MORE POPULAR than EU-style Open Banking, which is almost DOA.
MINT pioneered open banking over 10 years ago in the US by linking its PFM to bank accounts of consumers. Since then, there are dozens of fintech products in USA like Betterment, RobinHood and Venmo that provide wealth management, stock trading and payments by connecting seamlessly to consumers’ bank accounts to download statements, initiate payments, and do a variety of other things. Most of them work by accessing consumers’ bank accounts on behalf of consumers via their online banking credentials and scraping technologies via account aggregators like Plaid and Yodlee. Today, it’s estimated that one in four Americans with online banking has given away their online banking credentials to one or more of the aforementioned fintechs. That must be at least 25 million users of fintech apps in the US.
Compared to that, I doubt if EU-style OB has even 5 million users.
I know OB pundits have been saying for donkey’s years that scraping is unsafe, API is secure, US-style OB is unsustainable, blah blah blah. But, as the stark difference in customer numbers show, users haven’t given a damn.
Somewhat like Zoom. Entering a crowded market of video conferencing solution providers that already had giants like WebEx, Go To Meeting, Uber Conference, Google Hangout, et al, Zoom literally zoomed past all of them even before the pandemic struck. In the lockdown following the pandemic outbreak, its user base has shot up by between 10X and 30X depending upon which report you go by. Now, Zoom has many well-documented issues related to security and privacy. That hasn’t stopped it from becoming overwhelmingly popular.
Whenever I point out that US has more users of open banking than EU, Open Banking purists pushback and say US fintechs use scraping technologies whereas Open Banking uses API. Whenever I point out that EU fintechs aren’t going to achieve much more via API that they haven’t already achieved otherwise, the same Open Banking purists pushback and say Open Banking is much more than scraping versus API.