Open Banking: Repositioning of European Financial Institutions (essentials) 3658358149, 9783658358143

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Markus Bramberger

Open Banking Repositioning of European Financial Institutions

essentials

Springer essentials

Springer essentials provide up-to-date knowledge in a concentrated form. They aim to deliver the essence of what counts as “state-of-the-art” in the current academic discussion or in practice. With their quick, uncomplicated and comprehensible information, essentials provide: • an introduction to a current issue within your field of expertise • an introduction to a new topic of interest • an insight, in order to be able to join in the discussion on a particular topic Available in electronic and printed format, the books present expert knowledge from Springer specialist authors in a compact form. They are particularly suitable for use as eBooks on tablet PCs, eBook readers and smartphones. Springer essentials form modules of knowledge from the areas economics, social sciences and humanities, technology and natural sciences, as well as from medicine, psychology and health professions, written by renowned Springer-authors across many disciplines.

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Markus Bramberger

Open Banking Repositioning of European Financial Institutions

Markus Bramberger Enns, Austria

ISSN 2197-6708 ISSN 2197-6716 (electronic) essentials ISSN 2731-3107 ISSN 2731-3115 (electronic) Springer essentials ISBN 978-3-658-35814-3 ISBN 978-3-658-35815-0 (eBook) https://doi.org/10.1007/978-3-658-35815-0 This book is a translation of the original German edition „Open Banking“ by Bramberger, Markus, published by Springer Fachmedien Wiesbaden GmbH in 2019. The translation was done with the help of artificial intelligence (machine translation by the service DeepL.com). A subsequent human revision was done primarily in terms of content, so that the book will read stylistically differently from a conventional translation. Springer Nature works continuously to further the development of tools for the production of books and on the related technologies to support the authors. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Responsible editor: Carina Reibold This Springer imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

What You Can Find In This essential

• Useful assistance with questions about the opening of the market for banks and the controversial provision of infrastructure for fintech companies • Essential details about open banking products, their advantages, and possible risks. • Previously unpublished information on emerging conflicts of interest, challenges, security gaps, and substitution risks for market participants.

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Preface

The European banking landscape is in the midst of a paradigm shift that has never been seen before in this form. Financial institutions are facing fundamental changes and a new era is dawning in the financial world. Banking is about to undergo a fundamental change of direction. It is completely uncertain what the financial service provider of tomorrow will look like and which facets will characterize it. However, it is clear that it will be different and, in particular, more flexible than the traditional bank of today. Strongly changing customer requirements, desires, consumer needs, and their satisfactory resolution by an excellently positioned service provider in the financial sector is definitely considered a current challenge. Above all, the way in which information is gathered at the beginning of the consulting and sales processes for products and services forces Europe’s traditional providers of financial services to reorient themselves, therefore to revise their "mission statement" if necessary, and consequently to strategically reposition themselves in the market. This trend-setting and forward-looking situation, which has been the subject of controversial discussion in specialist circles, has given today’s bank a blatantly high cost pressure on the one hand and an unprecedented competitive situation on the other. The European Union’s conscious and deliberate stimulation of competition and the opening of the banking infrastructure in Europe was made possible by the revision and simultaneous extension of the content of the PSD II (Payment Services Directive II). In the future, it will be necessary to regulate anew who - only - manages customer data or - also - (co-)shapes the market. Because one thing is undisputed:

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The value of customer data and their generated information on consumer behavior is revolutionizing. Relevant experts like to call this the "new gold". Because nothing seems to be more valuable than knowing who is potentially buying which product, at what time, for what reasons, by means of which medium, and in what quantity, or who statistically would like to buy it. Markus Bramberger

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2 Reasons for Opening up the Banks: Opportunities and Risks of Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Banking Monopoly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 The Influence of the European Union . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Modern Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 4 7

3 Open Banking Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Financial Technology—Fintech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Operational Open Banking Products . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.1 API Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.2 Blockchain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.3 Chatbots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.4 Gdpr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2.5 Instant Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4 Pros and Cons of Opening Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Conservative Banking Tradition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Administrator Versus Designer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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5 Opportunities, Risks, and Challenges Due to New Framework Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Major Adaptations of the PSD II . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.1 Aims of the PSD II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1.2 Beneficiaries of Open Banking . . . . . . . . . . . . . . . . . . . . . . . .

25 25 27 28

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5.2 Innovative Financial Service Providers . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Conclusion and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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1

Introduction

Triggered by a wave of digitization, processed by powerful, mostly mobile devices such as smartphones or tablets, customers see added value primarily in the so-called “third-party provider” (3rdPP or TPP). These are, for example, payment initiation service providers or account information service providers. With their outstanding technical equipment, these third-party providers are positioning themselves in the highly dynamic cashless payments sector in order to restructure the value chain around customer relations by means of innovative financial technology (fintech). For the majority of Europe’s traditional banks, it represents a threshold to open up to innovation, to reorient themselves, to enter into or allow synergy-forming alliances with fintech companies. There is too much reluctance to be displaced or substituted. There is no question, however, that it is imperative to consider the possible opportunities offered by new products and services in order to offer oneself anew on an innovation-oriented path. Open banking and its new players have a strong influence on basic sales strategies and their underlying processes in so-called “traditional banking”. Accordingly, financial service providers are required to increase their level of acceptance of the ever-growing fintech industry - with all its forward-looking products such as: • • • •

Instant payments (in EUR and foreign currencies) GDPR (General Data Protection Regulation) API (Application Programming Interface) banking Blockchain and chatbots -

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0_1

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Introduction

to re-examine and evaluate. We are therefore facing an undisputedly formative, opportunity-generating but also risky phase in the European sector of financial institutions. From this it can be logically concluded that management decisions have the highest priority.

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Reasons for Opening up the Banks: Opportunities and Risks of Substitution

2.1

Banking Monopoly

Various players, ergo participants, share the European payment traffic network, namely the European payment traffic market in retail banking on the one hand and in corporate banking on the other. Some of them work with different payment methods and are active in different parts of the value chain. The competitive landscape is also very diverse. This results in a complex and highly fragmented market (Barrie et al., 2016, p. 9). The PSD II (Payment Services Directive II) makes its prioritized objective very clear. Payment services are essential for the functioning of key economic and social activities. The opening of the market for new means of payment, efficiency gains in the payment system, more choice and transparency are also current regulatory objectives. In addition, the aim is to offer existing and new market participants equivalent conditions for their activities. In addition, the strengthening of consumer confidence—as well as a high level of consumer protection—is explicitly emphasized. Another important regulatory objective is the continuous development of an integrated internal market for fast and secure electronic payments. The fragmentation of the European payments market must be ended, as important areas of the payments market are still divided along national lines. European legislation places an emphasis on the issue of security. Users of payment services must be adequately protected against security risks. According to the EU legislator, the following regulatory measures are derived from this closing regulatory gaps where required by various technical circumstances and providing greater legal clarity—especially in the scope and definition of the areas of exception and the objective of uniform application of the given legal framework

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0_2

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throughout the EU (Huch, 2014, p. 5 ff.; Mühlbert, 2017, p. 248 ff.; Terlau, 2016, p. 124). The main and primary objectives of the PSD II are set out in the following text, following the opinion of the Parliament of the Republic of Austria of November 20, 2017, under document number 332/ME: New payment services, specifically payment initiation service providers and account information service providers, are linking their services to the Internet banking of credit institutions. They transfer data between customers, credit institutions and merchants without coming into possession of customer funds themselves. Until now, such new payment services have been operating in the “gray area” of supervisory law, so to speak. Payment initiation or account information service providers (TPPs) are now regulated as payment service providers. The significant increase in Internet and mobile payments makes it necessary to improve security in payment processing. In future, therefore, the payment service provider will have to require strong customer authentication from the payer in certain cases. This means clearly and verifiably establishing that a particular payer has ordered a particular payment. The legal position of the payer in respect of unauthorized payment transactions should be improved. The payer should be liable for misappropriation of a payment instrument only if he/she was able to detect the loss, theft or other misappropriation of the payment instrument. Even in this case, the payer’s liability should be limited to a maximum of EUR 50 (previously the liability limit was EUR 150). If a payment initiator is involved in the payment transaction, the payment service provider managing the account should initially remain liable to the payer. However, the payment initiator service provider should be required to refund without undue delay to the payment service provider holding the account the amount of the unauthorized payment transaction and any reasonable costs incurred in relation to the refund to the payer, unless the payment initiator service provider can prove that he is not responsible for the unauthorized payment transaction.

2.2

The Influence of the European Union

On the one hand, European integration is probably the most significant political development in post-war Europe, but on the other hand it was advanced for a long time by an elite consensus—without being greatly debated in the domestic

2.2 The Influence of the European Union

5

political public of the European member states. Apart from accession referenda, European issues therefore tend to stay out of the daily political agenda (Schulz & Walter, 2008, p. 40 ff.). Numerous theories on European integration deal with a “moving target”: a political phenomenon that is constantly changing and transforming in parallel with scientific presentation, description and observation (Bieling & Lerch, 2006, p. 9). The classic approaches are: • • • •

Federalism (Große Hüttmann & Fischer, 2006, p. 41 ff.). Neo-functionalism (Wolf, 2006, p. 65 ff.). Intergovernmentalism (Bieling, 2006, p. 91 ff.). Marxist political economy (Beckmann, 2006, p. 117 ff.).

Objectives and values of the European Union The EU member states share and live together the defined goals and values of the EU. The well-being of citizens is paramount. They strive for a society in which tolerance and inclusion on the one hand, and solidarity, non-discrimination and the rule of law on the other, are a matter of course. The European lifestyle is shaped on this basis (Borchardt, 2015, p. 60 ff.). The following are therefore the primary objectives of the EU: • Peace promotion • Freedom, security, and the rule of law without internal borders • A competitive market economy with full employment, social progress and environmental protection • Sustainable development based on balanced economic growth and price stability • Respect for their rich cultural and linguistic diversity, and the establishment of an economic and monetary union whose currency is the euro • Reducing social injustice and discrimination, promoting scientific and technological progress • Strengthening economic, social, and territorial cohesion and solidarity between the member states (see Schriegel, 2003, p. 4 ff.). The EU values are described as follows: Human dignity The dignity of man is inviolable. It must be respected and protected. It is the very foundation of fundamental rights.

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Reasons for Opening up the Banks: Opportunities …

Freedom The free movement of persons allows citizens to travel and reside anywhere in the EU. Personal freedoms such as respect for private life, freedom of thought, religious freedom, freedom of assembly, and freedom of expression and information are protected by the EU Charter of Fundamental Rights (Borchardt, 2015, p. 60 ff.). Democracy The functioning of the Union is based on representative democracy. European citizens enjoy certain political rights. Every adult EU citizen has the right to vote and stand as a candidate in elections to the European Parliament. He or she may stand for election in both the country of residence and the country of origin (Kirchhof et al., 2016; Kayser & Kollermann, 2011, p. 2 ff.). Equality Equality is about equal rights of all citizens before the law. Equality between women and men is part of all EU policies and forms the basis of European integration. It applies to all areas. The principle of equal pay for equal work was laid down in the Treaty of Rome as long ago as 1957. Although equality is not yet fully achieved, the EU has made significant progress. Rule of Law The EU is founded on the principle of the rule of law. All its activities are based on treaties voluntarily and democratically agreed by its member states. Law and order are upheld by an independent judiciary. The member states have delegated the power to decide in the last instance to the European Court of Justice. Its judgments must be respected by all. Human rights Human rights are guaranteed by the Charter of Fundamental Rights of the European Union. These include the right to freedom from discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation, and the right to protection of personal data or access to justice. The EU builds on these jointly defined and agreed objectives and values. In 2012, it was awarded the Nobel Peace Prize for its commitment to peace, reconciliation, democracy, and human rights in Europe (Brasche, 2013, p. 398). The institutions and the underlying structure of the European Union are as follows:

2.3 Modern Banking

• • • • • • • • • • • • • •

7

European Parliament European Council Council of the European Union European Commission Court of Justice of the European Union (ECJ) European Central Bank (ECB) European Court of Auditors European External Action Service (EEAS) European Economic and Social Committee (EESC) European Committee of the Regions (CoR) European Investment Bank (EIB) European Ombudsman European Data Protection Supervisor (EDPS) Interinstitutional bodies

In the unique institutional framework of the EU: • The general political priorities are set by the European Council, in which the EU heads of state and government are represented (Heilsberger, 2016, p. 191). • Directly elected members represent the European citizens in the European Parliament (Heilsberger, 2016, p. 191) • The European Commission, whose members are appointed by the governments of the member states, represents the general interests of the EU (Hell, 2010, p. 89). • The governments of the member states defend the interests of their country in the Council of the European Union (Heilsberger, 2016, p. 191).

2.3

Modern Banking

The payment traffic market is currently undergoing fundamental changes in the European private and corporate customer segment. The market is developing extremely dynamically. New technologies, new players such as third-party payment service providers, a fundamental change in legislation, and changes on both the supply and demand sides are changing market models. (Barrie et al., 2016, p. 2). Future changes on the supply side are likely to have an impact on the mix of payment methods, for example on the growth of A2A payment transactions and the replacement of cash and card payment transactions. New providers such

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as account information service providers (AISPs) and payment initiation service providers (PISPs) have a greater “disruptive potential”. They should also drive innovation. Changes in legislation and technology are forcing market participants to rethink their strategic response to the future payments market (Barrie et al., 2016, p. 3). New technologies are being introduced, consolidation is taking place, new and innovative players are emerging, legislation is changing radically, and customers are changing their payment behaviour—the actual payment process is therefore increasingly becoming an integrated product. It is therefore essential for the various market participants to base their strategies on the optimal business model in order to take advantage of the new revenue pools (Barrie et al., 2016, p. 7). It is true that the distribution of income in payment traffic will change, but the value chain in EU payment traffic is still traditionally controlled and managed by banking institutions. However, the available technologies reduce the transaction costs for the market-based coordination of individual processes and thus contribute to a massive splitting of the value chain. Individual stages of the value chain can be occupied by non-bank players within the framework of a disintermediation process. In particular, however, only if they can achieve a comparative advantage over banking institutions in the production of the respective sub-process output. All the indications are that the value chain could be restructured in the near future, as the development trend shows (Riedl, 2002, p. 372 ff.). Especially in the phase of payment initiation and in the stage of payment transmission - due to the increasing occupation of customer interfaces and terminals by non-banks, so-called TTPs (third-party providers) or rather only weakly developed fulfilment of the original banking function, the transformation of information - banks are subject to very strong disintermediation pressure (Riedl, 2002, p. 375). Within the value chain of payment traffic, the following sub-processes can basically be named (Moormann et al., 2016, Sect. 2.1): • Payment initiation • Authorization • Settlement (clearing) between the payment service providers of the payee and payer holding accounts • Settlement between the account holding payment service providers of the payee and payer • Information of the payer and payee about the payment executed

2.3 Modern Banking

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• Making the equivalent of a payment available to the payee • Processing of payment complaints. Payment systems use agreements and technical standards to ensure that these steps are carried out securely and reliably between all participants in a payment system. These processes—together with the roles mentioned above—constitute the “eco-payment system”. Payment is not an end in itself, and accordingly this system is embedded in the extensive value chain that includes the business and settlement processes—before and after a payment. The value chain starts as soon as the customer is approached or customers search for products, ergo services. This also applies, or subsequently, to the comparison of different offers, the selection of a product to be purchased, orders, delivery of goods and invoicing, right through to the payment process, customer service or any complaints processing. Primary services in this context are information on current offers to the target group, the provision of loyalty services, and the evaluation of customer information to address customer segments more precisely (Moormann et al., 2016, Sect. 2.1).

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Open Banking Operations

Designed for mobile devices: Open banking It is only in recent years that the concept of open banking has become more common. A term that cannot be defined by simple explanations. Open banking programs attempt to profitably exploit disruptions in post-PSD II payment traffic. For example, through investments in APIs, which have recently been discussed in more detail, but also through investments in value-added services or possibly also in partnerships with non-banks. Integrated platforms across the entire procure-to-pay cycle, using data and information flows from buyers and sellers, for example, in the context of risk assessments. This strategic approach is referred to as (part of) open banking—up to ecosystem solutions. In the style of Eckrich and Jung (2016), open banking is defined as follows: “Opening up” is similar to the experience of a “first mover” outside the financial industry over the last decade and offers great opportunities in a challenging environment. This environment can be characterized as follows: • Zero tolerance for errors. Reputational and security risks due to its role in the economy as a key infrastructure. The protection of funds and personal data as well as “transaction banking” can be regarded as core competencies of a bank. As providers of a central infrastructure, banks experience additional pressure in connection with maintaining and changing extensive operations and reconciling them with the requirements of permanent availability (Kipker & Veil, 2003). • Banks operate in a strict and changing regulatory environment. Although the strategic plans and forthcoming regulations have been clearly communicated to the banks, their interpretation, their understanding of the strategic consequences and the most efficient implementation of compliance are time and cost intensive processes (Haertsch et al., 2003, p. 132 ff.).

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0_3

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Open Banking Operations

• Banks have digitized their customer-related (sales) aspects since the early years of the Internet. This proved to be difficult in view of the highly individual, overlapping and interrelated IT infrastructures, which were not necessarily digitized in parallel. This complexity makes it costly to adapt and maintain these infrastructures (Brühl & Dorschel, 2017, p. 136 ff.). “Opening up” within the environment described above offers a wide range of opportunities, which are accompanied by the chance to offer new products and services securely on an innovative path. The next section summarizes the perceived challenges and opportunities associated with opening a bank (Schlohmann, Kurt, in Bodek et al., 2017, p. 399). Challenges for banks that are opening up Three challenges are of particular importance for banks in opening up: Challenge 1: The risk of disintermediation by third parties Customer loyalty could come under pressure because it is to be expected that “open banking” could soon become the “new normality” for some customer groups. However, the opening up is accompanied by the risk of accelerated disintermediation of the banking role as the “de facto” financial “service provider”. This could lead to a partial loss of customer relationships and thus to fewer “cross-selling” opportunities (Bodek et al., 2017, p. 490 ff.). Challenge 2: Reputation risk and brand trust “Open APIs” present a wide range of security challenges, as well as potentially fraudulent third parties, digital tampering, personalization, unauthorized use of data, and customer privacy. Securing funds and personal data for custody and transaction services is a basic requirement for the financial industry. From the customers’ perspective, trust is the common denominator and the basis of these products. A bank’s reputation depends on how trustworthy customers rate its services. The impact of the PSD II “Access-to-Account” guidelines will continue to increase customer awareness of data ownership and security. Therefore, banks need to consider how to develop a “governance” control model to ensure that participating third parties do not damage their reputation (Bodek et al., 2017, p. 471 ff.). Challenge 3: The challenge of change From a technical perspective, banks are faced with the challenge of providing API functionality. This mainly means the IT infrastructure to third parties, while maintaining their own operational standards. Existing capabilities, fraud detection, KYC

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Open Banking Operations

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and general security, and transaction monitoring standards need to be updated to address security concerns. The aspects of the “open API” affected by turnover present a number of challenges for banks. If a bank cannot deliver on the relevant promises within a short period of time, there will be competitive consequences, as fintech companies can act much faster. These consequences could lead to a decline in the customer base with the effect that banks will no longer be able to benefit from economies of scale. As a result, banks whose business model is based on high scalability will experience increased cost pressure (Bodek et al., 2017, p. 492 ff.). The technical challenges and the challenges posed by the change in a bank’s value proposition can also be described as the organizational challenges facing banks on their way to becoming digital “service providers”. These challenges include problems related to bureaucratic silos, resistance to change, internal focus, and differing opinions on appropriate strategic direction. Another challenge will be cooperation and conflict resolution with third parties (Brühl & Dorschel, 2017, p. 245 ff.). At the industry level, the changes associated with “open APIs” will also influence current business models. This requires a cross-industry dialogue in which common aspects of “open banking” should be defined. Since there are fundamental differences in customer behavior, in the interpretation of regulations by member states and in the technical infrastructure at the national level, this dialogue will most likely take place at a national level, in coordination with a pan-European approach. Opportunities for banks that open up Opportunity 1: Improved service innovations Opening up gives banks the opportunity to improve their current range of services in two different ways. • Extend the current offer: Expanding the current products and services beyond payment and account services, such as toward “digital identity” services. • Breaking new ground: Taking advantage of the sharing and accumulation of customer data from different accounts and enriching it with existing data from partner banks and/or fintech companies. With the help of improved data analysis, it can lead to an upgrading of products and service innovations. Opportunity 2: Larger and improved sales The uncertainty surrounding the services to be provided discourages banks from offering their product range on digital platforms of other banks or third parties.

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A standardized commission model for shared services is already offered when opening up within an “open banking” oriented environment. This model can be used to distribute more products and services across multiple platforms and devices together with other banks and/or fintech companies. In the software and telecommunications industry, the process by which customers are offered a large number of different services for an agreed tariff is called “bundling” (German = Bündelung). Within the “open banking” environment, “bundling” can now be used simply as a medium to bring products and services to the customer. It allows customers to be choosy about a number of specific product offerings (possibly from different banks and fintech companies). At the same time, customer relevance is enhanced by individual customer adaptations (Fastnacht, 2009, p. 90 ff.). Opportunity 3: Improved risk mitigation A standardized concept for the distribution of products and services requires a standardized concept for security. This allows banks to emphasize their brand name as trustworthy and secure while benefiting from greater reach. It is expected that the intended exchange of information between banks will also improve decision making and harm reduction measures regarding fraud prevention, KYC and “anti money laundering” (AML) (German = Geldwäschebekämpfung).

3.1

Financial Technology—Fintech

So-called “fintech start-ups” overrule the banking and financial services sector in the course of the wave of digitalization. The value of information is being restructured and the handling of customer data—in more granular terms we are talking about operational consumer information—is putting banks in particular under great pressure to adapt (Brock & Bieberstein, 2015, p. 106 f.). The term “fintech” is a comparatively young collective term. It is composed of the partial terms “financial” (service) and “technology” (Rasche & Tiberius, 2017, p. 2 f.). Accordingly, it has already been outlined what the fintechs are all about. It is a “suitcase term” for financial services that are provided with the support of (information) technology (Jhoon, 2015, p. 359 ff.). Large digital platforms such as Apple, Google, Alibaba, and Amazon have already secured important interfaces to the customer (Helmold & Terry, 2016, p. 141 ff.).

3.1 Financial Technology—Fintech

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This opening of the market, also known as open banking, the stimulation of competition, and the clear underpinning of the importance of the consumer, will enable a legislative amendment to be initiated. Against the backdrop of the above, the European banking landscape with all its products, services and locations is certainly one of the most interesting topics to follow, which is currently undergoing revolutionary structural change (Langen, 2015, p. 18 ff.). Many financial platforms—such as the provider PayPal, for example—have been adapted to the new market. They gained in importance with the spread of the WWW. Online payment services, such as PayPal, started to pop up only a couple of years after the birth of the World Wide Web (Gonzáles, 2004).

Accordingly, third-party providers (TPP(s)—payment initiation service providers and account information service providers;) are positioning themselves to revolutionize the banking sector, the currently lived way of communication, the focused and target group oriented use of information. Fast, secure, competition stimulating, and consumer-oriented—these are the arguments for change. All of this in order to recognize, arouse, and satisfy the wishes and needs of customers and to help the institution offering the service to achieve possible profits (Brock & Bieberstein, 2015, p. 111 ff.). What will the bank of the future look like? What services will it provide? Will the bank of today still be able to jump on the bandwagon toward the financial service provider of tomorrow? Or will banks—as we still know them today— be replaced across the board by innovative and digitally excellently positioned service providers? The past proves, scientifically verified, that after product revolutions—which is why services are also addressed—and product substitutions, the same market participants never determined the same market participants again. On the contrary, many of the former market leaders disappeared from the competition. The examples of companies such as Kodak or Fuji Film may be given here (Hill et al., 2015, p. 233). The products offered by the companies mentioned above have been substituted by the new market leaders with regard to modern and digital storage media (Hill et al., 2015, p. 233 f.). Fintechs Based on the market definition of fintechs by Statista Deutschland (2018), what is actually behind the term is discussed below:

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• Fintech sees itself as a short form of financial technology and has become the central term for the structural change and digitalization of the financial services industry (Ornau in: SRH Fernhochschule, 2017, p. 49). • The collective term “fintech”, which has not yet been clearly defined, is used in the context of the digital market outlooks to refer to financial services that use digital infrastructure to establish new types of offerings and settlement processes in traditional areas of banking such as lending, investment strategies and payment transactions (Rasche & Tiberius, 2017, p. 50 ff.). • The characteristics of the digitization process of financial services include simplified access for end users via the Internet or mobile apps, an increase in the speed of processing via automation processes, cost reductions, a strong service orientation, and a high degree of convenience, transparency, and the exploitation of network effects (Böhnke & Rolfes, 2018, p. 39 ff.). • The fintech market is characterized by an enormously growing number of start-ups and companies without a banking license (non-banks). However, a subdivision of the market into classic banks and non-banks is not meaningful for the consideration of the overall potential, as consolidation processes, co-operations, and white label solutions will not allow a clear demarcation on the provider side in the future. Therefore, a function-oriented segmentation is preferred, based on an access or business model-oriented market subdivision (Rasche & Tiberius, 2017, p. 5 ff.). It is undisputed that the term “fintech” represents the sum of individual innovative, high-tech, and also mobile application possibilities. As a whole, one speaks accordingly of open banking.

3.2

Operational Open Banking Products

The following section explains the main terms and the underlying products.

3.2.1 API Banking API banking: “Application Programming Interface banking”. Via APIs, data, and functions of existing applications—e.g., online banking platforms—can be used by third-party providers. APIs enable the simple and fast integration of data or banking functions into third-party applications and services. This opens up new opportunities for financial institutions and third-party providers to make

3.2 Operational Open Banking Products

17

banking more convenient, versatile, simple and therefore more customer-friendly for customers: • For example, in Bank “A’s” e-banking, the user can also access the data of his other bank details “B” and additional services without having to leave or change the application. • Or the user uses third-party payment and financial apps that work with the data of his existing bank account(s) “A”, “B”, “C”. API banking essentially describes the future-oriented use of data that is made available via APIs not only to the respective bank but also to other service providers. As a result, banking and the use of external financial services will become easier and more versatile for customers. API banking is not based on hype, but rather on a development that has a profound impact on the business model, structure, and strategic orientation of banking institutions (Brühl & Dorschel, 2017, p. 86; Gamblin & Williams, 2017, p. 8 ff.; Capellmann et al., 2018). API Banking with its underlying products is very much focused on the user of financial services and in particular his needs. This outlines, for example, a traditional bank customer or the user of an app offered by a financial technology company (fintech company), possibly a start-up. API Banking—and this is something that traditional full-service banks need to understand, internalize, and use in their day-to-day business—is not a one-way street and should in the best case—to the advantage of all market participants—be shared by banking institutions and fintechs. Junior vs. senior user Senior option (exemplary discussion): The bank client does not wish to operate several electronic banking systems, each with its own access and log-in. Customers demand a single, extensive and comprehensive platform on which they can conduct all their banking transactions and use all the additional services they require securely and conveniently. Junior opportunity (exemplary discussion): Existing electronic banking information is made operational on third-party platforms using APIs for external services. In this way, external providers generate the possibility, of course exclusively and explicitly only with the consent of the customer, to offer adequate products with this information and data. Between junior and senior opportunities, there are numerous, individually controllable and adjustable mixed forms (controllable by providers and users). However,

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the focus is always on comfortable, user-oriented user interfaces, intelligent and secure networking of data from compatible and different sources and thus the use of a wide variety of services on the user interface. For a customer with several accounts at different banking institutions and some additional products, the individual user interface could be presented as follows as an example: • All accounts with all functions at a glance • Transfers—external and internal • Domestic and international transactions in all currencies and real time with all allowed and automatically detected fee options (BEN/OUR/SHA) • Display of all special conditions incl. standard fee and any time limits (cost transparency) • Management of securities accounts including transparent presentation of current real-time prices, performance development, costs, and fees • Credit cards—sales, expenses and fees. Important: Information about how much turnover is still necessary to obtain service xx or discount xx. Reference to free insurance benefits etc. • Online payments with bank connection or via credit cards • Investing via robo advisor platform • Investing via crowdlending platform • Bitcoin wallet management (will be critically reviewed) • PFM (Personal Finance Management): Individual control. The system recognizes which account—across all institutions—currently offers the best interest rate to financial companies. Automated transfer postings, also across institutions

3.2.2 Blockchain Blockchain: Literally translated from English, blockchain means “Blockkette”— in this case a chain of transaction blocks. Blockchains can be seen as a modern, innovative, and secure digital register that records transactions between, for example, a bank customer and a payment service provider. The online network is managed by several computers—namely those of the participants in the transaction. Before a transaction takes place, it must be verified from each computer. This is, of course, encrypted in order to guarantee and manage the security of the transaction. As a result, the parameters of the transaction join together to form a chain, which is modulated into a computer code.

3.2 Operational Open Banking Products

19

A blockchain can also be defined as a kind of transparent database. In a so-called “digital account statement”, any—however small—detailed information of a transaction is recorded and made (viewable) for the users of the network. Through this processing procedure, the blockchain provides the necessary and required information transparency between participating users (Laurence, 2017; Rueckgauer, 2017, p. 14 ff.; Gayvoronskaya et al., 2018, p. 72 ff.).

3.2.3 Chatbots Chatbots: Defined in a focused way, a chatbot is software that communicates with the user. It is an intelligent, innovative, and future-oriented dialogue system, which usually works via a—technically not demanding—text input and text output mask. Essentially the same as users are used to and know from classic chat and messenger programs. Chatbots can answer questions, make suggestions for products or services, offer alternatives, confirm bookings, provide support, and much more. Depending on the programming in text, image, video, links or also with voice in spoken language. The aim is to improve the quality of the dialogue with customers to the highest level in order to identify, satisfy or, if necessary, also awaken needs (Heinemann, 2018, p. 72 ff.; Gentsch, 2018, p. 165 ff.; Bodek et al., 2017, p. 230 ff.). If all the highly innovative technologies mentioned and explained are now considered as a bundle and in operational use, a possible definition with regard to open banking and so-called fintechs results. The title of open banking using fintech is the subject of the following chapter.

3.2.4 Gdpr GDPR: The General Data Protection Regulation (GDPR) is the new legal framework of the European Union that defines how personal data may be collected and processed. The GDPR, in force as of May 25, 2018, applies to all organizations based in the EU that process personal data and all organizations worldwide that process data belonging to EU citizens. The potential economic benefit lies in the right— provided that the consent of the underlying person is available—to customer or generally personal data:

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• To delete, • To share, • To transfer, to collect data • Aggregation, • Analysis, • Categorization, and to enable the development of various new services and monetization alternatives (Saleem, 2017, p. 26; Mühlbauer, 2018, p. 96 ff.)

3.2.5 Instant Payment Instant payments: There is a global trend that is also emerging in Europe. At the time of the second quarter of 2018, for example, several test phases were running in Austria and the first real phase was launched in the fourth quarter of 2018. Work has been and is being done at full speed on setting up a real-time infrastructure. This real-time payment product includes overlay services (under development), which include B2B, C2B, and B2C. The aim is to create a uniform pan-European solution for payments in the currency euro (EUR) (Bodek et al., 2017, p. 320 ff.; Brühl & Dorschel, 2017, p. 250).

4

Pros and Cons of Opening Banks

Progress and advance or regress Imagine Facebook, the email provider or even banks automatically make special payments from an account. The electricity tariff is automatically adjusted and optimized, and travel insurance is automatically taken out before a holiday trip. All this is possible with the PSD II. The clear and obvious aim of the EU Commission is to stimulate competition in the European banking and, specifically, payments market. Only a few banking specialists know the new banking directive in detail, but nevertheless the PSD II has an impact on more than one billion European bank accounts. This is where the massive impact is illustrated, made tangible. The always controversially regarded monopoly of the banks over account data and consumption information of your customers is accordingly abolished. Financial institutions are now forced, with the consent of the account holders, to pass on information to third parties without charge. On the one hand, the existing banking infrastructure that has been created and access to sensitive customer and user data is being opened up to third-party providers, and innovative business models—still without verified empirical results on the actual successful applicability of assigned regulations—are being subjected to a now rampant density of regulation. On the other hand, the substantial need of the banks to adapt to the newly created conditions, which in part can only be achieved with massive efforts, is trivialized. The implied change in the value chain of cashless payment transactions needs to be examined in detail (Huch, 2013, p. 35 ff.).

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0_4

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4.1

4

Pros and Cons of Opening Banks

Conservative Banking Tradition

In scientific circles the development is controversially discussed. Clear conflicts of objectives leave no doubt that more detailed investigations are more than justified. In layman’s circles, critical scientific questioning of a topic is often confused with innovation-transforming behavior. Are traditional banks missing out on digital change? For traditional financial institutions a race against time could begin. If the new players, the so-called third-party providers—non-banks—are not offered adequate services fast enough, more customers could turn away from them in the direction of competition. Not only in the youngest age groups has the share of third-party apps already risen considerably, but also in the older classes corresponding products are already being used operationally. As already discussed in detail, this development will be accelerated by the legal change under the abbreviation PSD2, which came into force on January 13, 2018. Third-party providers will then be allowed to access the account data at the house bank with the consent of the customer. With the dwindling sovereignty over the current account—the monopoly on customer data and consumptionrelevant information—the traditional financial institutions will lose their most important competitive advantage over the new digital competitors, the so-called start-ups and fintechs, who are excellently positioned digitally. If these third-party providers succeed in gaining customer confidence through a reputable image and secure products, increased market movements, and shifts in the revenue chain can be expected.

4.2

Administrator Versus Designer

Basically, it makes no difference whether open banking is seen as a technical process or as a major movement. It is an issue that will change the financial world forever. Like most changes that generate sustainability, bank opening will be experienced primarily as an organic process and only secondarily as a disruption. Accordingly, there is an opportunity for a concretely considered reorientation of financial institutions. Who will act as a data manager—and who as an innovative financial service provider. Only one thing would not be a promising option: Not to participate. Just 30 years ago, traditional banks had virtually no other competitors, ergo competitors. Consultations and services were naturally provided locally in the respective branches. Customer confidence in the banking institutions was comparatively high. For bank customers, they—the traditional

4.2 Administrator Versus Designer

23

financial institutions—played a relevant, constant, and correspondingly consistent role. This situation no longer exists in this form. Recent studies confirm the impact of the new competitors on traditional banking, as customers are increasingly reducing their liabilities to banks. The financial services industry is—also in a global perspective and not only limited to the European market—very susceptible to having to cede significant customer strata and segments to non-traditional financial service providers, start-ups and fintechs, due to competition. Another primary factor is the numerous scandals in the banking sector, in the recent past, which may have massively eroded confidence in banks. This is apparently dwindling in several areas at once, such as data protection, security, transparency of charges, and the availability of objective, independent financial advice.

5

Opportunities, Risks, and Challenges Due to New Framework Conditions

5.1

Major Adaptations of the PSD II

No more additional charges for card payments From January 13, 2018 merchants will no longer be allowed to levy separate charges for common card payments, SEPA credit transfers and direct debits in euro. This applies throughout Europe to bookings and purchases both in stationary retail outlets and on the Internet (Huch, 2014, p. 34 ff.). Liability limit drops from EUR 150.00 to EUR 50.00 Victims of misuse of the bank or credit card, direct debit or online banking will in future only be liable—with the exception of gross negligence or intent—for a maximum of EUR 50.00 (Bamberger et al., 2017, p. 1787). More consumer rights in the event of incorrect transfers In the case of unauthorized credit transfers, for example due to misuse, banks must refund the incorrectly debited amount (Parliament of the Republic of Austria, 2018). Eight-week right of refund for SEPA direct debits enshrined in law Consumers can have the amount of money refunded without giving reasons (Bundesverband Öffentlicher Banken Deutschlands, VÖB, 2017: Chapter: Evaluation). Supervision extended to other payment services Payment initiation services and account information service providers will be regulated and placed under the supervision of the Federal Financial Supervisory Authority (Payment Services Supervision Act, 2018, p. 7 ff.)

© The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0_5

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Opportunities, Risks, and Challenges Due …

Strong customer authentication required The bank must require strong client authentication. This applies when the customer accesses his payment account online, initiates an electronic payment transaction or performs an action via remote access. The customer must show at least two categories of information from three categories: 1) Knowledge, for example a password; 2) possession, for example a chip card; 3) inherence, for example biometric characteristics (Brühl & Dorschel, 2018, p. 397). Exceptions from strong customer authentication planned Transfer of very small amounts (Mülbert, 2017, p. 261). Reservation of card payments only with consent For example, many hotels or car rental companies block an amount of money on the customer’s card account when booking or renting a car. With the introduction of the PSD II, customers must agree to a reservation (Mülbert, 2017, p. 309). For cross-border payment transactions, the following detailed adjustments are required: • The PSD II now regulates not only EU and EEA currencies, but all currencies for those parts of a transaction that are located in the EU/EEA area. Here there are exceptions and additions regarding the currency sent versus the currency holding the account. • The value date and the making available of funds is clearly regulated for the first time by the PSD II. • Transfers—regardless of the currency—should only be carried out in the EU/EEA area with the SHA (shared—sharing of charges) fee option. • The OUR option (all charges are borne by the originator) does not apply to transfers within the EU/EEA area, regardless of the currency, in the event of non-conversion on the consumer account to be debited. • The BEN option (all fees are paid by the beneficiary) is already no longer valid through PSD I. • Intermediary banks or routers may not retain any fees or charges for transfers in the EU/ERW area that reduce the transfer amount. Regardless of the currency in which the transfer is made. The transfer amount must arrive at the recipient’s account without any deductions and be booked as such. However, the payee’s payment service provider may agree with the customer to charge fees and to settle them in one booking transaction. The received transfer amount must be communicated and made visible as such. The charges as a separate item must also be communicated and made visible as such (Bamberger et al., 2017, p. 2079 ff.;

5.1 Major Adaptations of the PSD II

27

Huch, 2014, p. 45 ff.; Wandhöfer, 2010, p. 193; Breuer & Schweizer, 2003, p. 91 ff.)

5.1.1 Aims of the PSD II Since the entry into force of the first Payment Services Directive in 2009 (PSD I), the payments market has undergone significant technical developments. The diversity of electronic payment services and their practical importance have continued to grow strongly. Mobile payments in real-time speed have arrived in the mass market. Is it to be welcomed that fintech companies are pushing this rapid trend even further and is it to be ensured that the regulatory framework keeps pace? (Huch, 2013, p. 46 f.). Already during the national implementation of the PSD I, there was some confusion as to which regulations would affect which role in the payment traffic flow chain: As long as the operator is not an intermediary, the activities are not regulated by the PSD. This is very unclear despite the guidance from the FSA and EU […] (MercadoKierkegaard, 2007, p. 175 ff.).

The Payment Services Directive II, which will be examined in more detail below (Huch, 2014, p. 2), enables the given circumstances for the upheaval in the banking sector. The rapid development in the payment traffic market, the integration of innovative and new technologies—including business models as a result of digitization—lead to various complex adaptation requirements (Moormann et al., 2016, p. Chap. 2 and 3). As an outcome of these changes, the need to regulate the payment service industry has become more prevalent over the last two decades […] (Salmony, 2014, p. 156 ff.).

This was the basis for the revised Payment Services Directive II ([EU] 2015/2366, Payment Services Directive II, PSD II for short), which was issued at the end of 2015 with a series of regulations to enable more extensive competition and increase security in payment transactions (Hellenkamp, 2018, p. 153 f.).

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Opportunities, Risks, and Challenges Due …

The PSD II—Payment Services Directive—at EU level had to be transposed into national law by January 13, 2018. In Austria, this law, which has to be implemented on a mandatory basis, brings about the Payment Services Act II (ZaDiG II). Due to the largely fully harmonized provisions of the PSD II, there is largely no national leeway for implementation (Bamberger et al., 2017, p. 1778 ff.). Typically EU-directives need to be transposed into national law within two years after officially accepted […] (McKenna, 2014).

The PSD II essentially provides for three main tasks with the following measures (Hierl, 2017, p. 167 f.) • Regulation of third-party payment service providers • Introduction of strong customer authentication for online payments • Establishing clear and customer-friendly liability rules for unauthorized payments

5.1.2 Beneficiaries of Open Banking Who are the ultimate beneficiaries of this revolutionary change in the industry: Consumers, fintechs, retailers, and banks? And when will this change take effect? Has the “kick-off” already taken place, will there be a “big bang”, or will the change in the industry landscape creep in in a harmonized fashion? On the one hand, the existing banking infrastructure that has been created and access to sensitive customer and user data is being opened up to third-party providers, and innovative business models—still without verified empirical results on the actual successful applicability of assigned regulations—are being subjected to a now rampant density of regulation. On the other hand, the substantial need for banks to adapt to the newly created conditions, which in some cases can only be achieved with massive efforts, is trivialized. The implied change in the value chain of cashless payment transactions must be examined in detail (Huch, 2013, p. 35 ff.).

5.2

Innovative Financial Service Providers

Target groups to be focused on, the financial market, the market environment, various implementation guidelines are still very uncertain. Nevertheless,

5.3 Conclusion and Outlook

29

a fundamental strategic orientation of the product-providing market participants is—already now—considered to be target-oriented, although the situation surrounding the variants and possibilities of positioning new business models in relevant technical and scientific fields is still very uncertain. It is noticeably controversial in circles. As a result of this intensive debate on the content of the topic, however, it is seen that transaction banks, for example, are working on numerous initiatives to adapt business models to the new framework conditions and—derived from this—to capitalize on the market (Beimborn, Daniel and Heinz-Theo Wagner, in Bodek et al., 2017, p. 170 ff.). The increasing digitalization offensive in areas such as payment transactions and, in particular, the growing importance of mobile end devices pose massive challenges to the banking world and financial institutions in general. Of course, it also offers new opportunities and the option of providing customers with much more intensive support and advice beyond the mere processing of payments. In this revolutionarily changing market, banks are confronted with new participants and players from foreign industries as well as strongly changing customer requirements. In such a context, banks must decide how they want to position themselves and strategically align themselves in this phase of change. As well as which services they want to offer in the future or not (Schlohmann, 2017, p. 399).

5.3

Conclusion and Outlook

Findings on “open banking”: The previous chapters have described what “open APIs” and “open banking” are and how decision makers in the financial services sector can position themselves with regard to the upcoming changes. The main findings can be summarized as follows: • “Open APIs” could pave the way for “open banking”. Current fintech developments and the parallel introduction of the PSD II guidelines have fuelled discussions on opening up banks, for example, by using “open APIs” to enable “open banking” business strategies. At least ten community initiatives have emerged on open APIs and open banking, none of which are driven by banks. • “Open banking” has an impact on existing processes for products and sales. Product and sales strategies have always been among the core tasks of a bank. “Open banking” and the associated digital technologies provide new opportunities and challenges in terms of the scale and “scope” of products and their distribution in the digital age.

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Opportunities, Risks, and Challenges Due …

• Banks may need to make strategic decisions in their approach to “open banking”. Banks are challenged to find and express their own unique selling points in order to help shape values in an open business environment. Banks may need to rethink their strategies in terms of products and their distribution. They also need to explore new business models that go beyond the current offering. • API industry standards could maximize the profit and value of “open banking” if they were not considered purely technical standards. Standards are needed to create interoperability and to enable cost-effective and easy integration. The level of acceptance of API standards in the industry is the key to success and is determined by the “scope” of the user groups (individual, community, industrial, and universal) that define the standard. Equally important is the scope of standardization (e.g., technical, functional, operational and legal). Financial services require security, privacy, and compliance, so API standardization must evolve beyond technical and functional aspects to include legal, operational, and governance aspects. Finally, the use of standards could reduce the overall investment and risk per institution. • “Open banking” with standardized “open APIs” as the basic technology is still in its infancy. In view of current developments, rapid and collaborative development can be expected. This could create the conditions for a cross-industry dialogue involving stakeholders from banks and non-banks (Deng & LEE Kuo Chuen, 2018, p. 379 f.). The payment traffic industry is about to enter an exciting and formative phase. New strategies, partly determined by regulations and partly driven by opportunities, must be developed based on changing consumer behavior (Seidel, 2017, p. 19). Collection of keywords and paraphrases on the topic “Challenge for financial institutions through open banking”: • • • • • • • • • • •

Political and legal environment Data protection Technical security of infrastructures Socio-cultural environment Technological and environmental policy environment Demographic-economic environment Alignment of existing banking and financial services institutions Potential new competitors for existing market participants New products with regard to possible substitution Existing customers New customers

5.3 Conclusion and Outlook

• • • • • • • • • • • •

31

Internal industry competition in the banking sector Possible new value chain in the financial sector Possible new customer needs in the focus of the digitization wave Possible new sum or gain in value—new composition for consumers New criteria in terms of customer enthusiasm Feasibility of regulations Meaningfulness of regulations in terms of practicability Deliberate non-compliance with elements of the PSD II Reasons for deliberate non-compliance with elements of the PSD II Measurement of the degree of compliance with regulations Trend-setting reprimand and punishment for non-compliance with regulations Outlook regarding possible future market structure and market participants in the financial sector

It is essential for currently existing payment and financial service providers, those entering the market for the first time in the future or those at risk of substitution, to position themselves explicitly, therefore to definitely take a position or orientation (Heinemann, 2018, p. 17 ff.). With regard to positioning, the conventional parameters such as product orientation, customer orientation, and employee or production orientation are not addressed. Rather, the focus is on the extent to which existing banks are willing and, if necessary, able to adapt to the revolutionary and innovative market upheaval. Which customer clientele target group should be defined and how is the appropriate approach taken to actually and specifically address them? It is important to prevent cost-intensive wastage. Banking experts speak of a new beginning for the banking industry. Accordingly, basic values such as the “Vision and Mission Statement” must be questioned and, if necessary, realigned. In future, sales arguments such as an (existing) brand will be considered trivial in themselves (Bieberstein & Brock, 2015, p. 93 ff.). Institutions have to use scientific methods to analyze their existing strengths and weaknesses (e.g., SWOT analysis) in order to best substantiate their future orientation. It is also essential to obtain reputations, for example through market research. Analyses such as conducting a “semantic differential” help to ensure how customers or target groups view the institution as a service provider. Correspondingly, correct thrusts can be achieved with regard to market positioning (Levknecht, 2014, p. 37 ff.).

What You Learned from This essential

• A well-founded and detailed insight into the current market situation with regard to the handling of open banking and its participants • In-depth background information on the numerous opportunities for financial services companies to realign themselves and maintain their competitiveness. • Concrete and up-to-date statements on open banking products.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2022 M. Bramberger, Open Banking, essentials, https://doi.org/10.1007/978-3-658-35815-0

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