How to Choose Your Open Banking Partner

Fintechs, AISPs, TPPs, PISPs, aggregators – these are just a few of the new terms that have come up to describe companies working in and around the open banking ecosystem. Like the saying goes: a beloved child has many nicknames.

But if the APIs from the banks are universal for all fintechs and the data they are providing through them is the same – what is then really the difference between one TPP or another?

During my time working at a large bank, I met with numerous different third parties and discussed with all kinds of different players in the financial services industry. There are some key features I consider important to differentiate between when evaluating TPPs to partner with. So many factors come into play when making this decision; ease of implementation/documentation, product capabilities, user experience, price model, coverage – just to name a few.

When choosing the right open banking partner to expand alongside of, there’s a series of questions that you should ask yourself. Starting with, what do you need someone else’s help with? If you understand what you’ll be needing from this partner, then determining the hierarchy of below factors will be easier.

Without further ado, here are the 7 main questions that you should find answers for, to find the right open banking partner for you and your business.

Who is your customer?

Are your customers very cautious with their data in an unpredictable market? Populations vary a lot from country to country. Whereas some might be more lax and eager to test, others might be more risk-averse because of macro trends affecting them in a unique way. For example, a consumer in Sweden would likely be a lot more open to sharing financial data to get benefits than one in Germany – despite the two countries having similarly stable economies and sharing several cultural ties. For example the likelihood of the average German reading through all terms and conditions is also a lot higher than Swedes.

Several studies have shown that corporations of significant size take their own and users’ data very seriously and want to have full control over who is handling that sensitive information, especially since the implementation of GDPR. Knowing your customer well will help you judge the importance of the questions below.

What is the potential partner’s track record and future roadmap?

This might seem like a no-brainer at first. Of course you should check a company’s track record. But sometimes you need to look farther than the surface. Their financials are a good indicator, but they’re often not indicative of the bigger picture.

How has their progress been in the past few years? What are their customers saying? If the company has been expanding confidently into new markets, constantly developing and updating their products, partnering with increasingly more corporates, or taking big strides to further integrate with the open finance ecosystem, these are good signs.

These would be great signs on any fintech player, but they’re especially indicative of a dependable partner expanding in an open finance environment that requires a remarkable track record to thrive.

If the track record looks good, also ask questions about their future runway. Are they profitable today or on their way to get there? What is the likelihood of them surviving in a tough economic downturn?

What is their customer support model like?

When a payment isn’t going through, or users are having issues with the platform, they are going to call you, their supplier. You need an Open Banking partner that is committed to full-time, troubleshooting support. If they’re not known for their good support and availability, or if they seem to have a big enough client list, they might not be what you need in terms of customer service.

How do they manage the customer data?

The financial services industry is evolving rapidly due to the opening of previously locked down data sources. This has prompted businesses to take two extreme approaches to their handling of people’s data. Complete neutrality and hands-off treatment of data, that is, not keeping or doing anything with the information themselves; versus analyzing, sharing it or selling it to third parties for additional profit.

If they do use the data, you should ask questions about how they use it. Do they share data with any other parties in exchange for functionality or knowledge? Do they analyze it? Do they aggregate data and depend on external services for it? A complete understanding of their data policy is necessary, and after this is done, you need to evaluate whether this policy is consistent with your own needs.

Do you need them to handle the data for you?

As previously mentioned, the TPP’s handling of data is a crucial factor in your decision. You might want a partner that is disinterested in your data, treating it as a prized commodity to protect and deliver exclusively. You might, on the other hand, want a partner that is much more hands-on with your data. A partner that uses that data to add value to the chain, giving you an edge in one area or another. If this is the case, you have to tread lightly.

Ask yourself: Is the third party working in similar verticals or industries as you? Have they previously shown signs of moving and expanding in the value chain to compete with you and your solution?

Generally speaking, you don’t want to be offering services that are in a competing vertical structure to your TPP’s service offering. Otherwise, you might find yourself teaching the data providers how best to use that data to create value for your clients – who could then go on to become their clients.

Is the service you need their core service or a side service?

This one’s pretty self-explanatory. If it's their core service the service level is usually higher. If it’s one of many services they provide for a wide range of clients, you might get less of their attention. Consider requesting an SLA to receive consistent service.

How many banks do you need to integrate with?

Connectivity coverage is perhaps the single most important factor when deciding who to partner with for your data needs if your service is global. Is your service a local one with only a few different banks included, or do you need coverage all over Europe?

Data providers often boast about the number and quality of their bank connections, claiming their reach is extensive and that you’ll have access to a vast number of potential customers that you never had before. But this is only half true. One thing that financial institutions dabbling in open finance quickly realized is that data providers will often sell the sheer quantity of their connections as the end-all-be-all, without focusing so much on the quality of those connections.

These connections have to be maintained, tested, and optimized. Ideally, your data partner has experience doing this in or close enough to the markets that are most important to your business. You must make sure that your data provider is based in the market that is most important to you. Otherwise, you risk many issues in the future with experience, regulation, compliance, and uptime.

Good connectivity coverage doesn’t just mean connecting you to a lot of banks, it also means reliably and consistently connecting you to those banks on a regular basis. So, to recap, you want a data partner that covers your markets and is experienced in building, testing and maintaining connectivity in those markets.

The premier hands-off connectivity provider

If you’ve read this far, you’ve shown more interest in the topic than most people. I’d like to tell you five fast facts about Enable Banking.

• We are not analyzing, sharing, selling or working with any of the data, which puts us squarely on the side of data neutrality.

• Connecting to thousands of banks and maintaining a myriad of APIs can be an extremely resource-consuming process. We provide instant and secure connectivity to over 2,600 banks across Europe – and counting!

• We are made in Finland, and influenced by the high German standards on privacy.

• Open Banking APIs and connectivity is our main service, one that we according to our customers provide with excellence.

What factors are you or your customers evaluating? Please leave a comment if there is something you would like to add.