US Open Banking: Defining the Concept and Capitalizing on the Opportunity

Overview

This report explores what open banking means in the US, with an emphasis on the core banking providers at the forefront of the movement in this country, those banking institutions that have capitalized on the opportunity successfully, and what it all means for banks just beginning to embark on open banking.

Key Highlights

Open banking traditionally refers to the ability to share data, and specifically, consumer data. The concept originated in Europe with the implementation of the Revised Payment Services Directive (PSD2), which mandates that banks make consumer data available to third parties at the customer’s request, generally via application programming interfaces (APIs).
Absent regulation in the US, the concept has expanded beyond its original premise to include a range of integration capabilities. This opens up new opportunities like the ability to quickly integrate and deploy new products to Banking-as-a-Service (BaaS). But it also makes it harder to chart a path forward.
There are different degrees of openness, and the level you’re able to achieve in the US depends on what kind of bank you are. For example, if you are a large bank, you can build all the APIs you need and set the standards. If you are a smaller bank, or even mid-size, your level of openness is likely to be tied to your core provider and how they approach open banking.

All three leading providers in the US — FIS, Fiserv, and JHA — by now have API strategies, with varying degrees of openness. They’re all creating API gateways through which their services are delivered. However, because their systems are older, integration can be challenging, especially without knowledge of the core.
Banks are getting around this in a couple of ways. Some are using newer platforms — built to be API-first — but most are creating their own API layers that sit above the core. This strategy works no matter what core you’re on and is a good way to abstract complexity.
There are two distinct paths there: following the core providers or taking the reins. The route a bank takes will be a question of strategy. What do you want to do? How much do you want to manage? And how much help do you need?

The Bottom Line

Not all strategies need to be complex. Not every institution needs the ability to integrate widely with fintechs and other third parties. However, if leadership is looking to bring new services to customers, expand distribution through new channels, or even make the business a more attractive acquisition target, then more robust API enablement will be attractive. Ultimately, the right path will depend on what the bank is trying to achieve.