Banking Software Innovations

Even though (many) banks have seen #openbanking as an unnecessary and costly regulatory burden, the truth is that they would have to invent it had it not existed – to rephrase Voltaire. Let’s take a look. Open banking brings a mentality change: from a traditional, vertically integrated, static set-up to a dynamic environment where APIs offer ubiquitous, easy and straightforward connectivity among incumbent and challenger players alike. For banks it is their best chance in decades to transform by leveraging the enormous potential of the API #economy. Despite the different approaches, open banking is about facilitating #innovation by democratizing the flow of #data. But it's not a business model in itself. It does, however, facilitate the introduction of new, revolutionary concepts, which change how financial services are delivered and consumed. The most impactful new business models are what we call Banking as a Platform (BaaP) and Banking as a Service (BaaS). Even though they are sometimes confused, they are not quite the same, but they are the two (different) sides of the same coin. Let me explain: - Banking as a Platform: the bank is actually the platform and owns the delivery channel, however it does not (necessarily) own all the services but rather aggregates them (via APIs) from third parties (i.e. fintech players). The model could be relevant for larger and smaller banks alike: larger players that have the resources and the customer base to build an ecosystem around them or small challengers that want to grow and cannot afford to develop any of the offerings in-house. - Banking as a Service: the bank takes a back-seat role and provides the infrastructure (technical platform, licensing or additional services), so that client-facing partners can do the customer acquisition. Essentially BaaS is what sits behind the huge transformation of embedded #finance. You can think of BaaS as the bottom layer, the enabler behind embedded finance, which, in turn, refers to the outcome and is normally to be found one (or more) layers above BaaS. What is not yet fully understood is that the BaaS model creates opportunities not only across the entire value chain but also for very different banking players, i.e. from Goldman Sachs sitting behind Stripe Treasury and Apple Card to smaller banks without innovation expertise. Although it might sound controversial, banks today are not in lack of choice. On the contrary, their spectrum of choice as to what they might become is the richest they ever had. But it depends on 3 factors: 1) their willingness to adjust 2) having the right strategy in place and 3) (above all) execution. Look at each one separately and none seems beyond reach. Put them together and they become tricky, however it is the combination that will set apart winners from losers for years to come. Opinions: my own, Graphic source: Kapronasia, Embedded Finance Future in Asia

The Symbiotic Relationship Between Open Banking, Banking as a Service, and Embedded Finance In the rapidly evolving landscape of financial technology, three independent but interconnected concepts have emerged as drivers of innovation: 1️⃣ Open Banking and/or Open Finance 2️⃣ Banking as a Service (#BaaS) and/ or other business models incumbents will assume to monetise the opportunity, and 3️⃣ Embedded Finance. These paradigms are creating a #symbiotic #ecosystem that is starting to reshape the entire financial services industry. ⏹️ Open Banking: The Foundation Open Banking serves as the foundation of this ecosystem. It refers to the practice of banks sharing financial data and services with third-party providers through secure APIs. This initiative, often driven by regulatory changes, aims to increase competition, foster innovation, and improve customer experiences in the financial sector. 🔼 Banking as a Service: The Bridge Building upon the #infrastructure of Open Banking, #BankingasaService (BaaS) acts as a bridge between traditional banks and innovative fintech companies. BaaS providers offer a range of banking functions—such as account management, payments, and lending—as white-label services that can be integrated into other products or platforms. This allows non-bank entities to offer banking services without the need for a full #banking license or infrastructure. 🔼 Embedded Finance: The Ultimate Expression #EmbeddedFinance represents the culmination of these trends, seamlessly embedding financial services into non-financial products, platforms, or services. By leveraging #OpenBanking #APIs and BaaS offerings, companies across various industries can incorporate financial products directly into their customer journeys, creating more holistic and frictionless experiences. This symbiosis drives innovation, improves accessibility to financial services, and creates new revenue streams for both incumbent banks and non-financial companies. It also empowers consumers by offering more choice, personalization, and convenience in managing their financial lives. As this #ecosystem continues to evolve, we can expect to see even greater integration of financial services into our daily lives, blurring the lines between banking and other industries, and ultimately reshaping the very nature of finance itself. Arthur D. Little #fintech #payments #insurance #investments #loyalty #savings

Think Open Banking and Embedded Finance are separate trends? They’re actually working hand in hand to bring financial services right where you need them. Open Banking & embedded finance – Two sides of the same coin Open Banking, or the concept of FIs enabling third parties to access financial data, services, products and infrastructure through APIs, has served a key role in promoting competition and innovation in the financial industry. The breadth of APIs offered differs significantly between FIs, with payment and account information APIs still representing a significant share of available APIs. However, a range of other data, services and products, within the space of accounts, cards, lending, insurance, trade and wealth management, are becoming increasingly API enabled. With this development, FIs further pave the way for Embedded Finance, providing the financial building blocks which are made available via technical service providers and/or directly at the point of need in an external, client- facing non-financial platform. FIs typically act as balance sheet providers within this emerging Embedded Finance value chain, whereas the client-facing platform acts as a distributor of the embedded financial service. Key finding: rise of payment APIs Since the initial OBM publication in 2017, both the number and scope of payment APIs have continued to increase. Payment APIs now account for 34% of all observed API functionalities as shown in Figure 2. This rise can be explained by the growth of specific payment functionalities that have been added over time. The types of payment APIs include cross-border payments, instant payments (via various schemes), Buy Now, Pay Later (BNPL), standing orders for recurring payments, scheduled payments, request-to-pay and batch payments. In view of the current regulatory developments surrounding instant payments in Europe and the related use cases, INNOPAY expects the number of payment APIs to continue to soar. In particular, regulators in the EU are driving instant payment adoption throughout Europe as part of the payment sovereignty agenda. A similar development is ongoing in the USA, where the U.S. Federal Reserve (Fed) is launching its own instant payment service, ‘FedNow’, in July 2023. The work on this has already started, since the Fed began to formally certify FIs to implement instant payments in April 2023. Moreover, countries such as Brazil and India have already adopted instant payment schemes in the form of PIX and UPI respectively. As trends like these continue to spread around the globe, new use cases will continue to appear with payment innovations built on top of these real- time rails. 👉 Subscribe for more insights https://lnkd.in/d94JgWBU Source Innopay #fintech #openbanking #embeddedfinance

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 — 𝐚 𝐧𝐞𝐰 𝐢𝐧𝐟𝐫𝐚𝐬𝐭𝐫𝐮𝐜𝐭𝐮𝐫𝐞 𝐥𝐚𝐲𝐞𝐫 𝐟𝐨𝐫 𝐩𝐚𝐲𝐦𝐞𝐧𝐭𝐬 👇 Open Banking is not a product and not a new type of bank. It’s an API-based data and payment layer that allows customers — individuals or businesses — to securely share their bank data with third-party applications, only with explicit consent. Instead of financial data being locked inside one institution, it becomes portable, permissioned, and usable in real time. That shift is already changing how merchants handle payments, onboarding, and risk. — 𝐓𝐫𝐚𝐝𝐢𝐭𝐢𝐨𝐧𝐚𝐥 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐯𝐬 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 In traditional banking: → Customers interact directly with each bank → Data sits in silos → Every new service requires a new integration With Open Banking: → Customers authorize access once → APIs connect banks to fintech and merchant apps → Data and payments move securely between systems — 𝐇𝐨𝐰 𝐦𝐞𝐫𝐜𝐡𝐚𝐧𝐭𝐬 𝐮𝐬𝐞 𝐎𝐩𝐞𝐧 𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐭𝐨𝐝𝐚𝐲 • Direct bank payments at checkout Merchants like Zalando and Ryanair enable account-to-account payments by connecting directly to banks such as ING, Santander, or BNP Paribas, reducing card fees, fraud exposure, and chargebacks. • Faster onboarding and credit decisions Platforms and marketplaces use live bank data from institutions like Barclays or HSBC to verify income, cash flow, and business activity — removing manual document uploads and accelerating approvals. • Real-time reconciliation and treasury visibility Large merchants and PSPs pull transaction and balance data directly from banks like JPMorganChase or Deutsche Bank to automate reconciliation, improve cash-flow forecasting, and reduce operational overhead. — 𝐓𝐡𝐞 𝐛𝐢𝐠𝐠𝐞𝐫 𝐩𝐢𝐜𝐭𝐮𝐫𝐞: Open Banking laid the groundwork for: → Open Finance → Embedded finance → Real-time payments → Programmable money flows The global Open Banking market is growing fast — with payments, value-added services, and data-driven products leading the expansion. A ~27% CAGR through 2030 isn’t hype; it reflects real adoption across banks, PSPs, and fintechs (DashDevs LLC) Open Banking didn’t replace banks. It opened the data layer — and merchants are already building on it. — Source: DashDevs LLC ► 𝐓𝐡𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭𝐬 𝐁𝐫𝐞𝐰𝐬: https://lnkd.in/g5cDhnjC ► Connecting the dots in Payments... | Marcel van Oost

I have always said that partnerships are catalysts for transformation in Financial Services. This week’s announcement that Fifth Third Bank is partnering with Brex to power its commercial card program is more than just a fintech headline—it’s a signal of how financial institutions can accelerate innovation by leveraging external partners to upgrade their API and technology suite. Rather than building everything in-house, Fifth Third is embedding Brex’s API-driven payments infrastructure and AI-native finance tools directly into its offering. This move underscores a critical truth: banks don’t need to reinvent the wheel to deliver cutting-edge digital experiences. By partnering with fintechs that specialize in APIs, automation, and AI, institutions can: · Modernize faster without the burden of legacy tech debt · Scale intelligently by integrating best-in-class solutions · Stay competitive in a landscape where clients expect seamless, real-time financial management The Brex–Fifth Third collaboration is a blueprint for how incumbents can remain relevant: embrace embedded finance, adopt API-first architectures, and lean into partnerships that unlock speed and innovation. As financial services continue to evolve, the winners will be those who recognize that partnership is not a concession—it’s a strategy.

Excited to share some of the work from my independent study last quarter ahead of the CFPB’s potential announcement next month! 🎉 -- The Consumer Financial Protection Bureau (CFPB) is set to release new open banking regulations requiring financial institutions to share consumer data via APIs. While open banking is already progressing in the U.S.—with 75% of Plaid's transactions now API-based—most data has been flowing out of banks to fintechs and Big Tech. This regulatory push, applying to both financial institutions AND fintechs, is likely to commoditize customer transaction data. Fintechs that have relied on faster data retrieval and underwriting may find their competitive edge diminishing. On the flip side, this shift presents a significant opportunity for startups that serve financial institutions' open banking needs. As access to transaction data becomes standardized, financial institutions and fintechs are turning to AI to leverage proprietary data and improve client engagement. J.P. Morgan reported a 10-20% increase in application completion rates after integrating AI solutions. American Express's new AI tools have boosted response rates to targeted offers by 30%. These improvements in customer experience, personalization, and automation are expected to continue. ✨ The next frontier of open banking is merging it with AI to deliver hyper-personalized and automated financial services. ✨ Read my full article here: https://lnkd.in/g7WYi2Um

Big moves in payments infrastructure that every community bank and credit union executive should be watching. #Visa and #Fiserv just expanded their global partnership, and the implications go well beyond Europe. The two giants are embedding the Visa Acceptance Platform directly into Fiserv's cloud-native merchant acquiring and processing stack, creating a unified, API-first acceptance layer that simplifies integration, improves authorization rates, and reduces fraud and chargebacks across the board. For years, acquirers operating across multiple markets have dealt with the same headache: fragmented payment ecosystems requiring endless custom integrations and local compliance workarounds. This partnership attacks that problem head-on with a single connection point for authorization, intelligent routing, and data enrichment. Here is what I find most compelling about this. It is not just a technology upgrade. It is a signal about where the entire industry is heading. Cloud-native infrastructure. API-led connectivity. Embedded intelligence at the transaction layer. These are no longer aspirational roadmap items for community financial institutions. They are table stakes. For #CommunityBanks and #CreditUnions, the question is no longer whether your payment infrastructure needs modernization. It is whether your current core and payments partners are architected to keep pace with the ecosystem being built around you. If your technology stack cannot plug into unified acceptance layers, deliver richer transaction data to merchants, and support the agentic commerce protocols that Visa and Fiserv are scaling right now, you are already behind. The gap between the infrastructure that major processors are building and what most community FIs have access to is widening. That is both a challenge and an opportunity for institutions willing to act. #Payments #Fintech #PaymentsTechnology #DigitalBanking #CoreBanking #BankingInnovation #MerchantAcquiring #APIBanking #CloudBanking #FinancialServices #BankTech #FutureOfPayments #AgenticCommerce #DigitalTransformation #CommunityBankingTech