Strategic business models under open banking: A guideline for incumbent banks

Since their emergence, FinTechs have been rapidly propagating and capturing market share from incumbent banks. These newcomers are responsible for most of the industry’s recent innovations, besides being more agile and customer-centric in their delivery of innovative banking products to the market. With the advent of the open banking era, FinTechs now have the support and encouragement from regulators to compete for business on a level playing field alongside traditional banks. A partnership between banks and FinTechs can leverage each side’s strengths, thus maximising returns for both. This paper discusses, from an incumbent bank’s perspective, what role in a FinTech partnership it should take or, in other words, what kinds of strategic business models it should follow within an open banking framework. Towards this end, we have performed an evaluation considering both academic and practical resources in this discipline. Industry case studies of incumbent banks fulfilling various bank-FinTech partnership roles are presented in this paper. Our findings suggest that banks should consider open banking strategic business models based on their total internal resources and product offerings, as well as their appetite and readiness for participating in the application programming interface (API) economy.