In this model, the bank surrenders control of the customer interface and competes by using the strengths of its products to gain access to customers through third-party and competitor platforms. Banks will need to choose the service areas in which they are best placed to compete.

These products will be exposed to much more competition than in a closed market environment. In addition, these players will also need to factor in any potential fees that are payable to access third-party platforms.

In this model, the incumbent bank would no longer provide either the user interface or banking products. It would instead earn revenue from providing utility services to banking interfaces and banking suppliers. For example, it might offer use of its payment gateways to other players or provide them with background functions such as Know Your Customer (KYC) and Anti-Money Laundering (AML) checks. This is analogous to the revenue earned by telcos for enabling the streaming and provision of media content through their infrastructure.

While this is unlikely to be a preferred choice for incumbents, it may be an option for banks without a strong brand that struggle to provide a strong user interface or price-competitive products.

This model represents the status quo, whereby banks continue to offer a full range of services with no or limited API integration with TPPs. This could be an option for select dominant players with strong brands. This option is most likely to succeed where the incumbent bank focuses its energies on a specific niche segment or product in which it can differentiate its products from those available via the marketplace interface.

To remain competitive, players wishing to pursue this option will need to use customer data much more effectively and to adapt their pricing, propositions and user experience.

In this model, banks will retain the customer interface and remain the main point of interaction for customers and their finances; however, they will no longer provide proprietary banking products and services to customers. Instead, they will offer products and services via their interface from a number of different providers, including incumbent banks, challengers and FinTechs, to allow customers to choose their preferred third-party products. Customers would benefit from higher product and price transparency, as well as greater choice. This is arguably already happening in the investment management industry with the rise of retail investment platforms.

This option would require banks to adopt a new business model. As they may no longer take deposits or lend out proceeds, they are unlikely to make a net interest margin. Instead, they would generate fee-based revenue streams from third parties wishing to use the interface. It is also likely that they would seek to monetise customer data, subject to regulatory approval, for example by sharing with retailers wishing to offer rewards or discounts.

Incumbents considering this route would benefit from strong brands. This is the most challenging and demanding option, however, in terms both of the technology required for real-time integration with an ecosystem of third-party providers and the data-analytics capabilities they would require.

These four options are not mutually exclusive. We anticipate that incumbents looking to own the user interface would also continue to provide proprietary products and services, via proprietary as well as third-party interfaces. They will need to sharpen their own proposition to remain competitive, however, and may decide to withdraw from certain products and services where they are unable to do so.

Given their access to deposits, strong brands and expertise, incumbent banks that embrace the opportunities of the marketplace banking model to provide personalised, innovative products and to enhance their offering by collaborating with other players in the ecosystem will enjoy a significant first-mover advantage. As a result, incumbent banks have a real opportunity to win the battle for the customer interface and, therefore, the customer relationship.