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. As 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, then, is really the difference between one TPP and another?

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

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

Without further ado, here are the seven main questions you should answer 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. Similarly, the average German is more likely to read through all the terms and conditions than the average Swede.

Several studies have shown that corporations of significant size take their own and their users' data very seriously and want 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 further than the surface. Their financials are a good indicator, but they're often not reflective 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 for 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 about their future runway. Are they profitable today, or on their way to becoming profitable? What's the likelihood of them surviving 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 committed to full-time troubleshooting support. If they're not known for good support and availability, or if their client list is already large enough that you might not get the attention you need, they might not be the right fit for you.

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 one of two extreme approaches to handling people's data. One is complete neutrality: not keeping or doing anything with the information themselves. The other is analyzing, sharing, or selling it to third parties for additional profit.

If they do use the data, ask how. Do they share it with 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 once you have it, you need to evaluate whether that 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 carefully.

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 offer services that compete directly with your TPP's own 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?

If your service is global, connectivity coverage is perhaps the single most important factor when deciding who to partner with. 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 you never had before. But this is only half true. One thing financial institutions dabbling in open finance quickly realize is that data providers will often sell the sheer quantity of their connections as the be-all and end-all, without focusing as 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 running into issues down the line with local expertise, regulation, compliance, and uptime.

Good connectivity coverage doesn’t just mean connecting you to a lot of banks, it also means connecting you to those banks reliably and consistently 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 high German standards on privacy.

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

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

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