Open Banking Systems For Close- Minded Bankers?

07 May 2020 by rate3

During past 2-3 months 'open banking' has been mentioned in some crypto-medias, which suggested that it presents the direct threat to DLT's dominance over Finance 1.0.

Extract (Investopedia): "Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through APIs."

At the same time, despite such startups as Plaid (310 Mio), Tink (108 Mio), solarisBank (118M) and 10x banking (88 Mio) attracted a lot of VCs enthusiasm at the mid-2010th, it looks like this hype is already behind us and none of those companies has lived to their expected potential.

The prime reason of that is financial sector over-regulation (specially, privacy 'protection' and AML laws) coupled with regionality, which still prevents 3-d parties to access banks' clients information globally.

Second reason is that even under the different than in USA regulatory environment (e.g. EU) startups have to spend a lot of money and time trying to by-pass multiple additional red-types fighting banks corporate bureaucracy.

Third reason is that although international competition forces banks to slowly update its traditional systems, corporate management, which is motivated primary by higher stock prices achieved through buy-back programs, is not really interested in implementing new solutions which make transactions faster and more efficient because its eliminate banks' major source of revenues from withholding clients money several additional days charging "wiring" fees in a process.

All in all, I would not be overemphasizing the extend to which the traditional finance can be revolutionized by Silicon Valley startups. For that to happen the current financial system has to embrace new technologies and, in a process, to undermine its core revenues base - that's not likely to happen any time soon.