Other parts of this series:
The band Rage Against the Machine never specified which machine they were raging against. But it was probably a printer.
That’s the meme that crossed my phone the other day.
It got me thinking about Open Banking and the lessons we can learn from the printer world.
We all know that printers are cheap, but ink is expensive. We’ve all joked at some time or another that it’s cheaper to buy a printer than it is to buy the cartridges. (It’s not, by the way. These days, printer manufacturers sell printers with cartridges that are at most 25% of the capacity of the refill, which means you have to buy the printer and almost immediately, buy new cartridges for it.) I read somewhere that, gram for gram, printer ink the most expensive substance on the planet.
I’m getting to Open Banking, I promise.
We’ve all made the point that the printer manufacturers’ revenue model is selling ink, not printers. Same with razor blades. And we’ve all lamented the mess of competing standards where Printer A can’t take cartridges for Printer B. Interoperability of printer cartridges would make the consumer’s life easier, but it puts the manufacturers out of business. And that is not idle speculation. In the early days of the PC, computer manufacturers sold “IBM-Compatible” PCs, and put IBM’s PC manufacturing out of business.
For Open Banking to work, the API’s have to be interoperable. That’s the whole point of Open Banking. PSD2 is a mandatory directive to enforce Open Banking and define standards.
But we also know that interoperability kills business models. Two other things APIs absolutely have to be, are fast and reliable.
Banks get a lot of things right. But they are not always known for being fast and reliable. If you’ve ever driven from one ATM to another, or tried to pay at the point of sale but “the machine is offline, sorry,” or waited a week to get a loan approved, you know that banks have a way to go when it comes to those two things.
A banking API that is offline for 10 minutes is essentially useless to the user of that API. And in a world of interoperability, the user will simply switch to the API of another bank. An API that takes 500ms is not as good as one that takes 50ms. Again, in an interoperable world, customers will just switch APIs.
In Accenture’s Banking Tech Vision 2021, we identified as a top trend the fact that banks will be competing on technology in the future. The business instinct in these cases is to create a “walled garden.” The easiest example is the difference between Apple’s iOS operating system and Android. Almost any handset manufacturer (except Huawei) can license Google’s Android operating system and customize it however they want. But only Apple devices run Apple’s operating system and Apple’s apps, in a proprietary system we’ve nicknamed a “walled garden.”
Apple succeeds because its garden is “pretty”. It’s broadly customer-centric and Apple says its walls lock baddies out.
But walls have two sides. Apple’s strategy is to be a gatekeeper and keep its customers, partners and app developers as safe as possible—at the potential price of less interoperability.
Android’s philosophy is throw open the gates and let customers choose to manage their own risk.
This has made Apple the most valuable company in the world. But it’s not an example that a bank can easily follow. It will be interesting to see how, and on what basis, banks will be able to compete. You can download Accenture’s Tech Vision research here.