The list of the most popular pricing models for B2B fintechs; The neobank capital cycle; How to develop an API strategy for Open Banking (2024)
Hey everyone! In this edition of Fintech Wrap Up, we explore the transformative power of APIs in open banking, dive into the booming payments ecosystem in Africa and talk about profitability in neoban
Insights & Reports:
1️⃣ How to Develop an API Strategy for Open Banking (2024)
2️⃣ The neobank capital cycle
3️⃣ Africa’s payments ecosystem
4️⃣ Corporate Client Bots in Banking
5️⃣ The list of the most popular pricing models for B2B fintechs
6️⃣ Open Banking in Latin America
Curated News:
1️⃣ Klarna Sells Checkout Solution for $520 Million to Eliminate Processor Conflicts
2️⃣ Revolut seeks valuation of more than $40bn in employee share sale
3️⃣ Nearly $109 million in deposits held for fintech Yotta’s customers vanished in Synapse collapse
TL;DR:
First up, let's talk about developing an API strategy for open banking in 2024. APIs are the digital glue holding modern banking together, allowing banks to transform into platforms that can innovate and multiply value creation. There are four main approaches banks can take: complying with mandatory services, competing by consuming open banking data, collaborating across sectors to create open economies, and embracing the platform play to unbundle and reassemble services. No matter the path, APIs are everywhere and indispensable in today's financial services.
In the neobank space, higher interest rates have weeded out weaker players, but top neobanks are thriving. Despite the challenges of zero interest rates in the past, leading neobanks like Monzo and Revolut are now profitable, expanding rapidly, and developing financial super apps. These digital banks have adapted by leveraging high-margin products like B2B financing and personal loans, positioning themselves to survive future downturns.
Moving to Africa, the continent's payments ecosystem is booming thanks to the early adoption of mobile money technology. The privatization of the telecom sector and rising smartphone adoption are key drivers of this growth. Regulators in East Africa have been supportive, fostering an environment ripe for fintech innovation. With significant room for growth, especially in mobile and point-of-sale payments, Africa is a promising market for fintech companies.
On the corporate side, AI bots are revolutionizing banking for businesses. From streamlining complex onboarding processes to providing advanced data querying and regulatory compliance insights, AI is enhancing efficiency and client satisfaction. However, the challenge remains in balancing reliance on technology with regulatory compliance and safeguarding against potential vulnerabilities.
When it comes to B2B fintech pricing models, there are several popular options, each with its pros and cons. From traditional license-based models to usage-based and take-rate pricing, the right model depends on the specific product and market dynamics. Understanding these can help fintechs optimize their revenue strategies.
In curated news, Klarna made headlines by selling its online checkout solution for $520 million to resolve processor conflicts. Revolut is eyeing a valuation of over $40 billion in an employee share sale, highlighting its status as Europe's most valuable startup. Meanwhile, Synapse's collapse led to nearly $109 million in deposits vanishing, impacting fintech Yotta's customers.
Insights
How to Develop an API Strategy for Open Banking (2024)
Open banking helps create innovative business models. Using APIs, banks can transform themselves from a business to a platform, allowing the ability to multiply value creation by enabling business ecosystems within and outside the enterprise. While every bank chooses its own path, there are 4 broad options that banks can adopt which are common across B2C (bank > customer) and B2B (bank > corporate) scenarios.
🔸 Comply
Businesses expose selected (often mandatory) services and data through APIs to help the ecosystem develop new service offerings. Normally relevant where Open Banking regulations exist (e.g., UK, Europe, Canada, Bahrain etc.)
🔸 Compete
Turn the tables. Banks consume Open Banking data from other financial institutions, like a fintech would. Businesses can use APIs to access third-party services and data, empowering themselves to develop new offerings in their bouquet of services.
🔸 Collaborate
As Open data sharing extends its footprint to other sectors, Open Banking changes to Open Economies, and offers joined-up propositions built on data-sharing across sectors. Examples include insurance, pensions, healthcare, and utilities.
🔸 Platform-Play
In 2020, market capitalization of the top 4 payment companies overtook that of the big 6 banks on Wall Street. Banks can follow a platformapproach built around unbundling and re-assembling products and services through Open Platforms.
✅ These platform plays can take the shape of:
🔸 API Marketplace
🔸 Financial services hubs
🔸 Aggregated data APIs
🔸 Banking as a Service
🔸 Embedded Banking / Finance
Whichever route you choose, one indisputable fact is that APIs are the channel for all, are everywhere today, and without doubt have become omnipresent in financial services.
APIs are the digital glue of modern banking, however while the number of APIs used in banking is growing exponentially, these are not necessarily by banks themselves.
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