With banks going out and starting to build bespoke marketplaces of fintechs and financial services partners, they are directly bypassing the efforts of Open Finance. For this article, I am defining ‘Marketplace Banking’ as the strategies used by N26, Monzo and Starling Bank, among dozens of others. Essentially, they focus on their core banking operations and then bring in fintechs and other financial services partners to create a bespoke marketplace targeted to their customer base.
The participants in these marketplaces are there because they provide some sort of benefit to the banking operator of the marketplace. Either paying to participate or providing some portion of fees and subscriptions back to the operating back for participating. These types of marketplace operations are no different from Apple or Google Play stores for financial services that are then being pitched to the bank’s customers.
These marketplaces may limit the customers’ ability to research and choose competitors to the service providers within the marketplace. The marketplaces usually do not include multiple providers of similar services. If your marketplace has Wealthsimple as a participant, you likely will not get an opportunity to compare or choose Robinhood or other competitors in the space.
Bank marketplace arrangements between the host bank and the financial services providers are generally not transparent. Customers do not have visibility into the bank’s business arrangements with the marketplace participants or how their use of those participants benefits the bank. Integrations between the bank and those partners are proprietary and do not extend outside of the marketplace participants.
Customers will also have no control over, or even visibility of, the data being used and shared within the marketplace. Are the marketplace participants getting anonymized data for all bank customers or only for those that subscribe to their services? When customers subscribe, they are not given any visibility into what or how much data is shared with the service provider. There is a good chance that the marketplace participants are getting way more data than they need to provide their services. The other risk is that the service provider is getting no data, and the customer has to start from scratch without any automated methods for sharing the required data.
Bespoke marketplaces close competition, restrict consumer choices and usually do not implement the open API integration methods we need to drive an Open Finance model for the financial services industry. We need banks to build open competitive marketplaces for customers that have built-in transparency of data and fees being exchanged - not closed, anti-competitive, opaque ecosystems.