"Company X" is the biggest bank in the world and does not even have a banking licence...
With the advent of open banking and API's, new companies will rise up and offer more comprehensive customer-focused solutions...
The more that I eat, sleep and breath open banking, the more and more it feels like the early days of the internet. Everybody knows that there is something big coming, but cannot quite wrap their heads around the business cases... Looking forward to today, the internet is an integral part of our lives. So, if we look back in 15 years, what are the obvious business cases that we should have seen back then?
I remember studying the internet & thinking; "How can I make my life or business better with this internet thing?" But I did not look or think forward to what could I do if the internet was bigger and had better adoption. My thinking was limited to my then current world and challenges. So the internet did not initially change my world. I let other entrepreneurs revolutionise my world. Enter stage left: Facebook, Twitter, Uber, Airbnb etc.
So let's look at our current day and the start of open banking and corporate\business API's. APIs into larger businesses and services will explode and there will be millions of API's out there all screaming "Pick me, Pick me". Let's take a simple example of a HomeLoan API. If the banks are all offering one, what is the real difference from one bank to another? Maybe the rate? But at the end of the day, as a simple service, it's all the same. So, if I need a home loan and all the banks are offering the same product or service, what will differentiate and make me choose a specific bank? The answer is not one the banks want to hear... The actual bank or bank product will no longer matter.
Enter "Company X". This company will be a master aggregator of all kinds of services that best suit a customer at a point in time. We will consume these aggregated services and not even know which bank is providing the home loan. But we will not even ask for a home loan, we will ask Company X for the "Transplant my home" service. Company X will with your explicit permission:
get me the best price for the house I want - via an estate agent service
sell my existing house for the best price
Purchase my new house with the most cost-effective bond product on the market
Close my municipal, power, data etc accounts for the old address
Open new accounts as above...
Organise a moving company at preferential rates
Organise cleaning services for the old & new home
Stock your fridge with the basics you need when you move in
Update your insurance policies
Order Uber eats for you & your family for your 1st night in the new home (on Company X)
Post on social media the move with pics from all associated vendors
Put a plan in place to pay off your bond 5 years sooner
None of the services above are actually offered by Company X, but the company has put a bunch of unrelated financial & non-financial services together in a way that delights all its customers.
Company X will continue to grow as it offers the best products & services based on AI and feedback from its customers. Its promotion or implementation of services are not driven by what makes the most profits or KPI's from internal business units. Its aggregation of services is dynamic and the company innovates faster than any bank, as it does not develop or try and own everything. In the future, company X grows so large that it uses its massive negotiating power to reduce cost & add more value to its customers.
Open Banking & API's will be the largest change to ever hit the financial services industry. Banks will have to learn to partner with fintechs and not try and own or control them. To play in this new market, Banks should act like VC's and invest in the future. So Partner & consume... or be consumed.