Financial Services Sectors Enter ‘Open X’ Era

The financial services industry has entered a new phase of innovation, called “Open X,” according to a new report from Capgemini and Efma. The “World Fintech Report 2020” explains how the Open X ecosystem—a multisectoral open platform era—promotes data sharing and collaboration between financial services firms and nonfinancial services firms. “The harsh reality is that fintechs have moved ‘from disruption to reality,’ and banks that haven’t embraced effective collaboration with startups are struggling to retain and acquire new customers,” note the report authors.

The movement toward Open X prioritizes customer experience over products; leverages data as a critical asset; prioritizes partnerships with ecosystem players; and promotes shared access, according to Capgemini/Efma. Applied programming interfaces (APIs) will be instrumental to success in this more collaborative environment. Last year, Capgemini found that 89 percent of banks were already using APIs when working with fintech companies, and 66 percent shared APIs with trusted partners. But banks will need to move from direct API monetization models—where incremental income is tied to specific transactions—to indirect models to allow for new ways to create revenue.

The 2020 report points to Uber as a prime example of a nonfinancial player using the full potential of the Open X ecosystem. “Uber customers experience a seamless ride-hailing service with administrative processes in the background and not apparent,” noted the authors.

Banks and fintechs will need to overcome differences in organizational cultures, address cybersecurity concerns, and ensure regulatory compliance to forge successful partnerships in an Open X arena, say the report authors. “As banks and fintechs develop collaborative maturity, they will drive innovation across the value chain more effectively. … Effective collaboration spurs the transition from an innovation-centric model to a business-focused approach in which the innovative solution is adopted and consumed at scale.”