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How Can Financial Institutions Thrive in an Era of Open Finance?

September 29, 2020|0 min read
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By Theodora Lau & Bradley Leimer of Unconventional Ventures 

The financial services business model has changed significantly during the past decade, as have the solutions that consumers leverage to manage their financial lives. We are seeing more examples of how banking services have started to disappear into non-financial applications as the value and utility of financial services become more open

One can now imagine a world where nearly every aspect of traditional banking can simply be an invisible feature of another industry’s customer experience.  

Welcome to the age of Open Finance.

As the facets of financial services have become increasingly cut apart over the past decade, we look for clues about where the industry is headed next — and where the biggest opportunities are for banks and credit unions to continue to serve the financial needs of their communities. In this new era of open finance, how can financial institutions iterate on their business model? 

It starts with understanding changes in human behavior in regard to how they bank.  

How do your customers and members make payments today? Where do they save their money outside of your core systems? How do they access their credit? How do they manage their wealth? Where do they get their advice? Are they increasingly being asked to manage portions of their financial lives through applications outside of your own? 

As the (now) old phrase goes — there’s an app for that.

Even during this pandemic, your customers are holding static funds within service applications like Starbucks, Stash, and Robinhood, sending money via Venmo, Apple Pay, Square Cash, and tying more of their spending into subscription services like Netflix, Hulu, and Disney+. They are also receiving (and accepting) credit offers through the web and mobile from companies like Affirm, PayPal and Klarna in extremely efficient Buy Now, Pay Later workflows. These activities have a draining impact on how your customers  manage their money. 

Cumulative changes in customer behavior will further degrade long-term financial relationships. 

What does this mean for traditional banks and credit unions, for their business model, and for their relationship with their clients? As core banking services become a utility, developers can now simply drop the snippets of code of nearly any banking activity — from onboarding and identity to payments to credit to investment — directly into their application workflow and make banking itself fade to the background. 

Your relationship becomes a replaceable feature. 

This is likely already impacting your financial institution as it moves the value of banking external to the function of banking. This has the potential to completely disrupt banking’s business model, and it has the potential to disrupt the value of financial relationships. 

This change in dynamics allows businesses external to banking to move nearly every financial transaction toward building their long-term relationships, not yours. The next decade will likely be even more disruptive as consumers continue to demand more convenient functionality and frictionless experiences regardless of the source. The ability to be at the right place at the right time — supporting consumers and their changing needs — cannot be understated. This business model goes far beyond simple digital transformation. 

Banking as a utility has evolved in markets around the world and spells further competition:

  • Companies in China and Southeast Asia offer aspiring models for Amazon, Facebook, and other technology firms. Tencent combines a network of consumer services, small business fulfilment, and finance in one powerful superapp. Alibaba and their spin off Ant Group offer payments (Alipay), savings (MyBank), investments (Ant Fortune, Yu’e Bao), credit (Ant Cash Now, Ant Credit Pay), credit ratings (Sesame Credit), and insurance (Ant Insurance Services), negating the need for an overlaying banking relationship from multiple parties. 

  • In Europe, open banking data and payment standards established by Payments Services Directive 1 and 2 have created requirements for large banks from Barclays to Santander to provide secure real time transactional data backend capabilities for technology providers and fintech startups to access and build value on top of, and these are gaining momentum with consumers. Open banking and open finance initiatives are well underway across many markets, including Australia, Southeast Asia, and parts of Africa. 

  • In the United States, open finance initiatives have been part of growing regulator activity for many years, with new competition from OCC fintech bank charters, startups acquiring banks like Varo, and from open banking proponents and providers of technology, like Cross River Bank and Radius Bank, which are enabling both banks and startups to offer a variety of banking services to their customers. There are now dozens of open finance infrastructure companies helping startups, from Marqeta to Synapse.

To understand how these changes are impacting your financial institution, you must be able to analyze changes to your customer’s behavior — how their transactions tell a story about the relationship they have with you and with other external providers where their data flows. The only way to do this is through clean transaction data, solid analytic tools, and experienced partners to unlock new value through this data.   

Through continually reviewing these changes in behavior, your institution can better develop products and services and choose appropriate partnerships that resonate with the daily lives and money management needs of your customers. It is imperative that your institution begin to develop a robust API-driven open finance strategy that is focused on partnering with those companies your customers are already using or likely to be using in the near future. The alternative is to fall further behind the marketplace. 

By being responsive and helping your customers analyze their daily spend, you have the ability to better facilitate savings and investments, to help build their wealth over the long term and better meet their financial needs. In this way, your relationship will not be seen as a utility — or cause unnecessary friction — in their lives. And as you enable just in time infusions of credit, you create new opportunities for your customers to quickly meet their changing needs. 

As you leverage data to connect real time behavior through more dynamic partnerships, you are creating a flywheel of impact on the financial lives of everyone you are privileged to serve.

In order to be as flexible as the non-financial competition you have building relationships with your customers, your new API strategy can leverage the data you have to build new forms of value. You must renew the relationship you have with them by being a central component of trust in ways that a non-financial provider cannot. This starts with clean and flexible data that can be leveraged as your customer requires in order to both broaden your relationship and better optimize their lives. 

Instead of resisting the growing reality of a more open banking model with more open data accessed by a robust set of APIs transactional data, financial institutions must develop ways to engage the benefit of other products and services alongside the trust created of their own. 

Data is the key ingredient at the heart of the future business model of financial services. 

This is also the promise of open finance. 

As banking becomes more ambient, leading financial institutions will embed themselves within the heart of their financial relationships — regardless of where they reside — in order to create new opportunities based on trust and the flexibility to grow into this new normal. 

We can no longer resist the future, we can only plan for an even better one. 


For more information on this topic of open finance, we suggest you look at MX’s Ultimate Guide to Open Banking and Ultimate Guide to Bank APIs. This article is the result of a paid partnership with MX.

Also look for a more global view on the topic of open finance in our recent article in Irish Tech News, as well as our One Vision podcast episode on this topic on Apple Podcast and Spotify


Unconventional Ventures helps drive innovation to improve systematic financial wellness. We connect founders to funders, provide mentorship to entrepreneurs, strategic advisory services to a broad set of corporates, and broaden opportunities for diversity within the ecosystem. Our belief is that anyone with great ideas should have a chance to succeed and every voice should be heard. Visit to learn how you can partner with us today.


Theodora Lau is the Founder of Unconventional Ventures. She is a speaker, writer and innovator, whose work seeks to spark innovation to improve consumer financial well-being and health. She focuses on developing and growing an ecosystem of financial institutions, corporates, entrepreneurs and venture capitalists to better address the unmet needs of consumers, with a focus on women and minority founders. As part of her work, she regularly mentors FinTech and HealthTech startups and fosters a growing partnered portfolio. She was recognized as LinkedIn Top Voice for Economy and Finance, top FinTech, Digital Transformation and artificial intelligence (AI) influencer by Onalytica.  

Bradley Leimer is Co-Founder of Unconventional Ventures. He writes and speaks about banking and technology trends, and advises startups, accelerators and major industry conferences in the financial services space. As the former Head of Innovation and FinTech Strategy at Santander US, he led his team to connect the bank to the FinTech ecosystem and served as an observatory for the Santander global organization for trends originating in the US with potential to accelerate globally. He lends additional perspective, leading marketing and technology efforts within regional banks and community credit unions, and from a decade of driving database marketing and analytic programs.  

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