Open banking, neobanks and Apple: The path forward
The combination of increasing customer expectations and the emergence of neobanks and open banking makes this an exciting period for fintech, Mobiquity’s VP of digital banking Peter-Jan Van de Venn, said.
Mobiquity mainly works with retail and SME banks, which makes sense, Van de Venn said. Digitization first came to retail because you need scale to automate. It progresses to SME banking from there. Van de Venn sees growing demand in wealth management. While corporate banking is behind retail, it’s catching up.

Your role model isn’t another bank

When planning a digital strategy, smart banks don’t look at their peers because that’s not where the market is headed, Van de Venn explained. They’re looking at Apple and Uber, who are miles ahead.
Van de Venn explained this is related to “experience relativity”, where people’s top experiences across all sectors become their expectation for everyone. If your Uber app can tell you to watch when opening your door because you’re in a bike lane, why can’t your bank offer a more intuitive experience?
“Banks have to realize that they don’t just compete on a product level with other banks,” Van de Venn said. “They compete on an experience level with these types of companies. That’s what consumers also expect from the bank, the digital experience that they see in their daily lives. Digital is so much a part of everybody’s life.”

Where neobanks have fallen short

Neobanks threaten banks. Unencumbered by legacy technology (and the same level of regulation), neobanks have lower costs. That much is true.
But a funny thing has happened over the last decade. In 2015, there was talk of replacing the banks. That hasn’t happened; in fact, it’s the opposite.
“Everybody said banks will be gone in 10 years,” Van de Venn said. “We have seen that the number of banks has only increased. Many customers stay with their bank.”
Van de Venn was recently at a conference where a speaker asked the audience if they had closed a bank account. Few did. How many opened a neobank account? Many hands shot up.
Often folks open a neobank account or two, but many do so for specific purposes. They keep their core business with their long-time bank. Van de Venn uses Revolut for virtual cards when he doesn’t trust a retailer’s payment method. Convenient for him but not profitable for the neobank.
Van de Venn sees that as an ominous cloud over the neobanking industry. Their model gets a foot in the door, but 95% aren’t profitable. Investors are starting to ask what comes next.

How Apple is doing it better and neobanks can (possibly) keep up

Look to Apple, which is getting into finance, but in a different way from neobanks, he cautioned. Banks have three building blocks: liability management, distributed access to consumer services, and their tech stack. Apple brings the distribution, with Goldman Sachs doing the rest (for now).
“This is more promising because you combine the strengths of two companies,” Van de Venn explained. “Apple has distribution power and the customer experience. It is straightforward to offer buy now, pay later these days.
“For merchants to accept Apple Pay, they don’t have to do anything. It’s automatic. So you have an extreme distribution power that Goldman Sachs uses here, and that’s a perfect combination.”
The significant advantage for neobanks is that they can innovate faster than incumbents. The latter have legacy technology, with some also having a legacy mindset. They should be emulating the Revoluts only when there is a good business case while avoiding attractive features that do not deliver revenue.
“There should be a business case, and you optimize between desirability, feasibility and viability,” Van de Venn explained. “That’s how you develop a roadmap for the longer term.
“I think some of those neobanks have been focusing on the desirability part too much, which is for consumers a greeting but for the bank itself and the business case, not for the longer term.”
He added that neobanks, by necessity, move away from their original model. Low subscription fees have been upped. Cash withdrawals now cost. Those early, low-yield transaction-based products have been joined by more lucrative lending and investment options. All the while, incumbents’ market shares have barely budged.

Open banking’s path forward

Based in Europe, Van de Venn has first-hand experience with open banking. Good use cases include permissioned access to bank accounts so banks can share data with third parties, initiating payment on behalf of the customer to third parties, and aggregating information from multiple banks into a complete overview of a customer’s financial picture.
Van de Venn said one good use case for allowing access to third parties is for credit checks. Access to transactional data provides more insight into customer behavior than credit checks do.
Another is for investing. Rabobank’s Peaks tops up transaction amounts with the excess amount invested.
But there remains a healthy skepticism about open banking and data sharing. Van de Venn said the biggest reason is because it’s an all-or-nothing proposition.
“There is no granular access to data yet, but I would love to do that,” he said. “That option is not there yet. So that needs to mature.”
Has open banking fostered more competition? Van de Venn’s unsure. It has delivered more value-added service with the potential for more.
What will convince more people to embrace open banking? Is more education involved? Van de Venn said there will be more, but the biggest mover is simpler. Show them what’s in it for them and acknowledge friction, like connecting their accounts and renewing consent every three months.
Maybe a mortgage provider gives a lower rate in exchange for access to those accounts. The lender makes better-informed decisions, and the borrower saves money.
“Or if I use that payment initiation, for instance, to make a payment and I don’t have to pay transaction costs to buy something, then it would also benefit me,” Van de Venn concluded. “But that’s not (currently) the case.”




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