It is interesting to speculate on what will happen to the value chain when the euro-API is in place. Will the European Commission create a vigorous and dynamic financial services world, or replace its bogeymen (Visa and MasterCard) with bugaboos (Facebook and Google)?
The wonderful people at ECN invited me to Berlin to give the keynote at their Mobile Payments Innovation Opportunity and Risk conference. My presentation is up on Slideshare if you want to take a look, but I can tell you right now that it wasn’t the best presentation at the conference. That was made by Olivier Halluitte from Chappuis Halder & Cie, who gave a super overview of the new digital bank experience, delivered a fascinating case study around AXA’s “mobile first” bank Soon and handed out some insightful ideas around the model for services going forward. I’ll paraphrase what he said by saying that he saw the implementation of banking functions being hidden and accessed through an identity layer created and owned by Facebook, Apple, Google and such like. He is not alone in seeing a future role for banks as an API that delivers financial services. According to Perficient, and I’ve got no reason to disagree with them, this kind of “Connected Banking” is one of the top five trends in the financial technology world at the moment.
The use of APIs and integration to diversify and advance product offerings is the future of financial services. Innovators at some of the well-established financial institutions are extending access to banking services for developers and partners in today’s digital economy to deliver new products and services in the marketplace, personalize experiences, add new mobile services and protect people’s privacy through authentication.[From Top 5 Financial Services Technology Trends – March 2014 | Perficient Financial Services Blog]
There is a danger that this “connected banking” model turns into a sort of “dumb pipe” model of banking, perhaps as is envisaged by the European Commission in their consultations around regulated third-party access to bank accounts (as discussed in part one of this API Blast). This was covered later in the day but our old friend Jean Allix from the Directorate GeneralCompetition (DGComp) and his colleague Philippe Pelle from Directorate General Internal Market (DGInt). Ulf Geismar from Edgar Dunn also referred to the “coming wave of regulation” and explained about the opportunities for new entrants to come into the payment space to compete in a fair playing field.
Here I am lobbying Jean Allix on your behalf.
I couldn’t resist asking, though, whether it really will be a fair playing field. Going back to the Olivier’s presentation, if the banks are essentially condemned to a future as utility pipes that are mandated to provide a “euro-API” for third parties (as discussed in part 2 of this API Blast), including the “OTTs” who have the relationship with the customer (and all the value-added services and profits) then they better have some plans to become operationally-efficient pipes otherwise they will be accumulated and agglomerated.
Naturally, this leads me to speculate what this will mean specifically for payments. If anyone can initiate payments through the API then won’t the fascist nature of monopoly capitalism shape the new business environment? How is opening up the market to competition going to help if the market is then dominated by (e.g.) Facebook and Apple instead of Visa and MasterCard? This cannot be what the Commission intends, but I am curious to know what other outcomes people are imagining. It could be that retailers and service providers take the initiative themselves and access bank account directly, for example.
I’m sure this won’t happen, of course, because I imagine that Visa and MasterCard are right now developing strategies for new push products that will sit on the euro-API and make it easy for merchants to accept new, lost-cost, hard-token, debit-lite payments.