The banking industry landscape is experiencing significant changes due to the emergence of
fintechs, which offer innovative banking services that challenge traditional banks' market
dominance. In response to these industry shifts, both banks and fintechs have embraced open
banking. The fear of market loss and control has led traditional banks to adapt to this shift, while
the desire to scale has motivated fintechs to participate in open banking collaboration. This study
examines the transformation of the relationship between traditional banks and fintechs from
rivals to collaborators through open banking; and explores the impact and implications of this
collaboration on the banking industry.
Using the Multi-Level Perspective framework, the research examines the technical and social
aspects of the transition in the banking sector. At the regime level, traditional banks represent the
dominant system, while fintechs constitute the niche level with their emerging innovations. The
study adopts a qualitative approach, using semi-structured interviews as primary data, and
incorporates secondary data from external sources to provide a comprehensive understanding
and validation of the primary findings.
The findings reveal that open banking collaboration is driven by factors including data access,
regulatory expertise, and modern technologies that facilitate collaboration between banks and
fintechs. Further, the research concluded that open banking collaborations benefit all parties
involved. Banks gain access to fintech technologies and enhance operational efficiency and user
experience. Fintechs scale their operations and leverage banking infrastructure to reach a broader
audience. Moreover, consumers benefit from more cost-efficient and inclusive financial services
and better agency over their financial data.
The research highlights the importance of regulations, specifically PSD2, in fostering and
securing collaboration between banks and fintechs. These regulations create an environment of
trust and encourage the adoption of open APIs for secure data sharing. Open banking also
enables advanced data analytics techniques and the integration of modern technologies like
machine learning, enhancing banking operations, fraud detection, and customer experiences.
However, challenges and risks need to be addressed. Banks should proactively develop strategies
to cope with the evolving landscape without falling behind, and fintechs should balance their
growth to maintain collaborative partnerships. Consumer awareness and understanding of open
banking are essential to ensure widespread adoption.