By W.B. King
For the last three years, Forrester Research has been investigating “open banking intermediaries” and during this time referred to open banking as an “emerging market.” In its latest report, however, Introducing The Forrester Wave: Open Banking Intermediaries, Q1 2023, Principal Analyst and Report Author Jacob Morgan said this segment has “matured.”
Noting that choice in the financial services landscape is getting more complex, due in part to the “constantly evolving market,” Morgan said that intermediaries are “pivoting their strategies toward open and embedded finance.”
Making it clear that the report doesn’t represent the entire vendor landscape, Morgan said the 13 “most significant” open banking intermediaries were studied (presented in alphabetical order): Bud Financial, CRIF, Envestnet, Finicity, finleap connect, Klarna, MX Technologies, Plaid, Salt Edge, Tink, Token, TrueLayer and Yapily.
As open banking matures toward open finance, the report found that intermediaries are evolving their “go-to-market strategies” in three distinct ways:
From consumer to business services.
From data to payments.
From delivering a single capability to delivering end-to-end value. “For some, this drives a laser focus on payments; for others, differentiation lies in tailored insights, risk profiling, and analytics — or from expanding use cases such as embedded authorization and carbon tracking,” the report noted.
Degrees of Fluidity
While the entire market has grown in recent years, Morgan said proliferation rates change from region to region. North America and the U.K., for example, have some of the most established providers but a “degree of fluidity” persists.
“Coverage of markets still matters, but the variety of capabilities offered by intermediaries is broad, from architecture through to end-user-facing software development kit (SDK)-delivered services. While the market solidifies, be mindful that vendor specialization and focus may evolve,” the report continued. “Match vendors to your functional and coverage requirements, but also evaluate with your firm’s future open finance ambition in mind, considering planned enhancements and scalability needs.”
Open banking intermediaries, Morgan noted, are focusing more on adding value as opposed to an initial focus on aggregation.
“These days, using an intermediary is less likely to be for compliance with open banking standards and more likely to underpin ambitions in an open finance future,” Morgan noted. “Intermediaries, now an established part of the landscape, are responding to growing interest in and adoption of open banking among both consumers and businesses and are pivoting toward open and embedded finance.”
According to Forrester, open banking intermediary customers should look for providers that offer the following:
Elevating open finance within their firm. “Previously, we noted that many financial services firms lack the executive focus or internal skills needed to fully exploit the open finance opportunity,” the report noted. “Several vendors are responding by investing heavily beyond developer-facing services, offering consultancy for data science or sales optimization through to user experience design support. Match what you need to what is on offer — for example, if you lack implementation capacity, prioritize vendors that have systems integrators on standby.”
Being clear about their future direction. “The market continues to consolidate following the high-profile acquisitions of Aiia and Finicity by Mastercard and Tink by Visa, and this will continue for the foreseeable future,” the report noted. “Align vendors with your strategic direction, and be sure to monitor the market for consolidation; if it presents a risk for you, probe for this in selection.”
Tink Offers Scaleable Performance Solution
Among “leaders” identified in the space were Tink and Plaid, holding the respective two top spots on Forrester’s list.
Founded in 2012, Tink offers comprehensive core capability with a “strong set of focused use cases,” the report noted. Deployed predominantly in Europe and the UK, Tink plans global expansion in the coming years, which is due, in part, to becoming a Visa company in 2022.
“Strategy is built around four product areas: payments, onboarding, credit risk decisioning and consumer engagement, delivered through two vertical units focused on banking/lending and payments/platforms,” the report found.
"The product vision is compelling: to offer an open finance platform that enables firms to load, combine, and enrich their own data with data aggregated from a wide variety of accounts,” the report noted. “Tink partners widely and builds integrations with server message block (SMB) platforms, fintechs, investment providers, e-commerce platforms and payment service providers (PSPs) to execute this roadmap. Continuous improvement is a mantra, with more than 60% of the team dedicated to product and engineering to assure success.”
Where Tink excels, the report found, is with its “off-the-peg” use cases and user-facing financial management that offers turnkey solutions, such as identity and verification services, risk assessment, and personal financial management (PFM) and business financial management (BFM) insights, with multiple payment options.
“This is built on solid aggregation, categorization and enrichment capability, with a single application programming interface (API) to please developers. A comprehensive developer portal supports team-based working and has a wide library of tools, SDKs, and sample projects to accelerate implementation,” the report noted. “Reference customers praised Tink highly for maturity and breadth of coverage, great service, client focus, and desire to perform. Reference customers also cited roadmap strength, continuous improvement, and responsiveness to innovation requests. Tink is ideal for all, especially medium and large firms needing a robust, performant solution that can scale.”
Plaid Excels With User-Friendliness
The San Francisco-based Plaid builds data transfer networks that power fintech and digital finance products. Founded in 2013, and with a network covering 11,000 financial institutions across the U.S., Canada, United Kingdom and Europe, Plaid counts MSU Federal Credit Union, Venmo and SoFi among its customers.
Noting that over the course of 10 years, Plaid has developed into a leading North American aggregator, with a growing presence in Europe, Forrester said the company is delivering on its mission to “unlock financial freedom” on a global scale.
“Plaid’s future capabilities align with customer priorities around acquisition and retention, risk, and fraud mitigation. It also plans to leverage its acquisition of identity and verification platform Cognito to improve customer onboarding,” the report stated.
Morgan further explained that Plaid is “proactively building an open finance ecosystem” that offers free services such as Core Exchange — an FDX-compliant open API specification and testing service — with the intention of making open finance a “reality” in the U.S.
“Plaid’s comprehensive aggregation services enable API and non-API connectivity for a vast variety of financial data, including payroll, small business support and accounting applications,” the report stated. “Payment initiation capability is API-based in Europe and executed via partners in the U.S., where virtual accounts from a bank-as-a-service (BaaS) partner also enable enhanced payment management. Plaid excels with user-friendliness.”
Plaid Portal, the report notes, provides consumers a “consent management dashboard,” and developer engagement is achieved via an award-winning portal, with broad client libraries and tutorials.
“Plaid also has a 180-person financial access team devoted to helping firms improve connectivity. Reference customers scored support and implementation capabilities highly, with a sense that Plaid seeks enduring partnerships,” the report noted. “Plaid is suitable for clients looking to build an open finance presence or with broad financial aggregation needs.”