Menu

3 tips to keeping a competitive edge as new entrants move into financial services

4 min read|Published December 16, 2021
How incumbents can keep a competitive edge as new entrants move into financial services

Our latest open banking survey reveals investments are on the rise, and financial executives are ‘very’ or ‘extremely’ interested in pursuing a wide range use cases. But competition is also ramping up – with new market entrants also looking to capitalise on the open banking opportunities. So, how can bankers make sure they remain on top of the game? Here are our suggestions.

TL;DR – Quick summary
  • While open banking brings a lot of opportunities for financial incumbents, it’s also making it possible for new types of businesses to step into the market.

  • To remain competitive against a new wave of market entrants, financial institutions can’t stay complacent. 

  • Our three tips to keeping an edge? Focus on enhanced banking use cases, ramp up innovation capacity and partner to gain speed.

TL;DR – Quick summary
  • While open banking brings a lot of opportunities for financial incumbents, it’s also making it possible for new types of businesses to step into the market.

  • To remain competitive against a new wave of market entrants, financial institutions can’t stay complacent. 

  • Our three tips to keeping an edge? Focus on enhanced banking use cases, ramp up innovation capacity and partner to gain speed.

One of the chapters in our latest report (on open banking investments and use cases) explores how the transition towards an open banking ecosystem is the blurring of boundaries between industries. Financial services are no longer limited to a certain type of business, but becoming increasingly embedded into the services that consumers and businesses enjoy every day.

There are already plenty of non-financial institutions making this move. Online and physical retailers, telcos and even hotel chains have entered into the realm of banking, seeking opportunities to create loyalty programmes, offer financing, and improve customer experiences with embedded finance.

Why does this matter? Well, while financial incumbents are still in a good position, they will have to fend off the increased competition with a new generation of market entrants – meaning they need to be on their toes and keep up with the pace of innovation. 

So how can they do that? Here are three recommendations outlined in our research. 

1. Focus on ‘enhanced banking’ use cases 

There are a range of different open banking strategies that financial institutions can explore to generate revenues and lower costs. But when considering their open banking investments, our recommendation for f​inancial institutions would be to focus on their core business – and bet on open banking use cases aimed at enhancing digital services and streamlining operations. 

Although there’s a big movement towards Banking-as-a-Service propositions, ultimately where open banking can help today is in increasing transparency of credit risk, consolidating the customer relationship and increasing customer’s total lifetime value by up-selling and cross-selling financial services.

To keep their advantage, incumbents should at least start off with this model as a low hanging fruit, since these use cases can bring benefits to multiple lines of business and processes in the customer journey.

2. Accelerate innovation capacity

Although some large financial institutions have recently been downsizing their innovation teams to focus on core operations and profitability, it’s important not to lose sight of the value that innovation can bring to the business. 

One of the biggest challenges has always been enabling efficient digital innovation by allowing developers to recycle code and easily scale application updates across markets.

Open banking technology platforms can greatly simplify the investment, giving a one-stop shop to ingest, enrich and categorise financial data, while deploying value-added services into core systems. 

When selecting a platform, consider to what extent it can accelerate innovation and if there's potential to create value across multiple departments.

3. Create value together with quick returns

In light of the increasing competition, and the ongoing focus on profitability and the customer experience, financial institutions should consider working with partners that have a proven track record in the enterprise segment. 

Since many executives expect that it will take years to capitalise on their open banking objectives, it’s important to consider long-term partnerships with open banking technology vendors.

Building confidence with the business will require stakeholders to show a quick return on investments. 

By focusing on low-hanging fruit with proven use cases, financial institutions can become fast-followers before the market transitions into a state of hyper competition. Such partnerships also ensure that initiatives do not go down the sinkhole of just building and maintaining.

Want more facts and figures behind open banking? Read out latest report, where we followed the money to uncover the state of investments and the use cases being prioritised by financial executives across Europe.

Get all the facts and figures
Following the money - Tink survey report on open banking invesments and use cases
Tink survey report

Find out more about the state of open banking investments and the use cases being prioritised by financial executives across Europe.

More in Open banking

Charlotte Hogg at Money 20/20
2022-08-04 · 5 min read

Charlotte Hogg @ Money2020 – five quotes on the future of open banking

What lies ahead for the future of open banking? Five Money 20/20 quotes from Visa Europe CEO, Charlotte Hogg

Open banking
Man on a sidewalk looking at his phone
2022-07-27 · 6 min read

3 easy ways to turn financial data into value

The democratisation of financial data is opening up new opportunities. Find out how to harness its power with open banking in our latest article.

Open banking
28% of self-employed struggle to access financial services
2022-07-21 · 5 min read

28% of self-employed struggle to access financial services

Self-employed workers are being left out of financial services. Here’s how open banking can help.

Open banking

Get started with Tink

Contact our team to learn more about what we can help you build – or create an account to get started right away.

Contact our team to learn more about our premium solutions or create a free account to get started right away.