Many industries have already been technologically disrupted. Financial services and banking won’t be any different.

New digital banking platforms will emerge with an automated, compliant core and a connection layer for all kinds of third party services to tap into. This is API banking, or marketplace banking.

In the evolution of fintech, we are currently experiencing the first wave. New companies compete with banks on specific products, but they rely to a great extent on the traditional banking infrastructure. Banks are pressurised by these newcomers, but the first wave of fintech has by no means the potential for disruption as the second wave. In two to five years fintech banks are expected to emerge and disrupt traditional banks. Traditional banks can survive or even dominate the fintech era by investing in their own digital banking platforms.

Evolving into a marketplace bank means mitigating several obstacles: regulations and compliance, security, organisational impact and legacy IT systems. There is a fast way: resulting in banks operating on a lean back end, being agile again and go wherever their customers are.

Digital banking initiatives will fail without strategic investments in emerging technologies. Analysts signal new, open, unified digital banking platform providers who offer new technologies. It is not clear that financial institutions are prepared for digital banking. But there is no doubt that the new business model of marketplace banking will emerge. Digital banking with open banking APIs will be mainstream in a few years’ time.

To read more on how to survive and dominate the fintech era, download this free white paper by Five Degrees.

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