#86 - Open Banking in 2025 - Game Changer or Boring Pipes

A sober analysis of Open Banking's outcomes, what it means for the broader industry and why Fintechs shouldn't index too much on it.

Hi all - This is the 86th edition of Frontier Fintech. A big thanks to my regular readers and subscribers. To those who are yet to subscribe, hit the subscribe button below and share with your colleagues and friends. Support Frontier Fintech by becoming a paid subscriber🚀

For group discounts, write to me at samora@frontierfintech.io. If you can’t afford a subscription, consider referring a friend. The more you refer the longer your complimentary subscription is.

Reach out at samora@frontierfintech.io to discuss sponsorships, content partnerships and advisory work. To find out more about working with Frontier Fintech, click the link below.

Note - I’ll be taking a one week break this week. That means this week’s Frontier Fintech GPS won’t be published as well as next week’s deep-dive. Podcasts will remain on schedule. The brain needs some rest for the creative juices to keep flowing.

Introduction

The deal was flawless on paper. A former colleague who once led trade finance at a top regional bank had engineered a trade payables structure for a leading supermarket, certain it would mark the peak of his career. Yet each time he sought the chief executive’s approval he met only polite deferrals.

Months later the same supermarket’s collapse splashed across the business pages. Internally its statements still suggested growth, but the chief executive had heard a truer story at private dinners and through quiet calls with suppliers and regulators. He had seen risks that no balance sheet revealed, operating on knowledge that never reached official documents.

That gulf between what formal data shows and what insiders know is a key source of the durability in bank balance sheets. Transactional data is not even half the story. Does the information sitting in African bank systems actually capture the signals lenders and fintech founders need, or does the decisive insight still travel by whisper and handshake?

This story always got me thinking about Open Banking and particularly its context in Africa. How much valuable information is in bank statements? Is all the valuable information tacit? Do you need to be an insider for you to have the entire picture of what’s going on? It reminded me of my own experience as a leader in a bank where I’d have access to specific information that my Relationship Managers didn’t and I’d tactfully stall on credit memos or provide spurious reasons as to why that file can’t proceed.

Nearly a decade after open banking entered the fintech vocabulary, and with Nigeria set to activate its own framework in August, a sober stock-take feels overdue. In this week’s article, I map what open banking is, distill its core promises, test which ones survive contact with African realities, trace their logical outcomes, consider the broader implications for the industry, and show founders where genuine opportunity lies.

Ultimately, Open Banking is a utility and the businesses that will thrive from open banking are those that are already solving a specific problem at scale and profitably.

What is Open Banking and What are the Core Claims

Open Banking has been around for a while. I wrote about it here, describing its implications for the Kenyan financial services industry - and here when discussing the different models available in open banking. Investopedia describes Open Banking as

A banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs).

The Open Banking Implementation Entity (OBIE) further states that;

Open Banking is a secure way for customers to take control of their financial data and share it with organisations other than their banks. It has the power to revolutionise the way we move, manage and make more of our money. For businesses, it is about making the management of cash flow and receiving payments cheaper and easier. - Source

Open Banking Nigeria goes further to describe the Nigerian context as;

In Nigeria, diverse bank APIs create costly fintech integration challenges. Open Banking, led locally by Open Technology Foundation since 2017, drives standardized APIs to boost innovation, financial inclusion, and economic growth. - Source

The central arguments made by proponents of Open Banking usually centre around a few core issues;

1. Customers have a right to own their banking data and can share this with whoever they please in a secure and controlled manner;

2. The ability to share data outside of its siloed nature in banks can spur increased competition and innovation in the banking sector;

3. There is financial exclusion particularly when it comes to lending. If banks share the data they have on clients, then Fintechs and other digital lenders can utilise this data in a more innovative manner to lend.

These are the three core reasons. Every other reason given can somehow be subsumed into these broader reasons. For instance, an argument made for open banking is that it creates market transparency helping customers make more informed decisions. This can fall under reason 2 above i.e. increased competition and innovation in the banking sector.

What matters to evaluate the usefulness of Open Banking is to evaluate these three reasons particularly in the African context.

Open Banking Claims Reviewed

The goal is to make logical decisions about what the actual impact of Open Banking will be and just as critically, how the industry will shape up, specifically how value will accrue.

Customers have a right to their own data

This is very simple and straightforward. If you go to a bank and ask for a bank statement or a credit statement, then the bank won’t refuse to give it to you. It belongs to you and it's your right. Granted they can play games and either drag their feet around, or charge you an insane amount, the reality is that you have a right. Open Banking simply means that rather than physical bank statements, the transmission of data and information is done electronically through APIs. It’s hard to object to this. In essence, in a data driven world where APIs are the new connectors, a bank customer has a right to have their data shared to an agreed third party via an API.

In fact, Jamie Dimon who has come out openly against Open Banking is largely speaking of form over function. His argument is that Open Banking as is being implemented in the US is largely screen scraping and there should be standards around Open Banking. He argues that a bank customer should know who is getting access to their data, what data they are accessing and how this data is being used. JP Morgan have been pioneers in Open Banking globally, even acting as thought leaders.

Their stance is clear and is made even more credible by the class action lawsuit against Plaid that alleged that amongst other things, Plaid was getting access to clients’ passwords, accessing their accounts privately and selling this data to third parties. If you want the real tea on Plaid, read here and here. No reasonable bank CEO would fight Open Banking on this premise.

Based on this, I expect open banking to continue gaining traction globally, but this will impact how its roll out and how the industry will look like. A point we’ll come to later.

Open Banking Enables Increased Competitiveness and Innovation

This is a more dubious claim and how you test this claim is by asking; for the financial services businesses that have truly innovated in the last decade or so, was open banking the core thrust of their growth and expansion? In other words, without open banking, would they have attained success.

We can simply look at a few champions over the last decade - specifically;

1. M-Pesa;

2. Nubank;

3. KakaoBank;

4. Alipay;

5. Monzo;

6. OPay

M-Pesa | Kenya

M-Pesa is the mobile money rail run by Safaricom that lets users deposit, transfer and withdraw cash through a nationwide agent network and simple text messages. The service reached more than thirty five million monthly active users by 2025 and processes billions of dollars in value each month, growth that was driven almost entirely by distribution scale and network effects rather than by any formal data-sharing framework. A key advantage in MoMo was that customer acquisition costs were low given that they already had an advantage with the Telco having significant market share, an almost similar dynamic to Kakao in South Korea. Kenya is only now drafting an open finance rule set that would bring mobile money data under a common standard, so open banking played no role in M-Pesa’s initial market dominance.

Nubank | Brazil

Nubank’s famous purple card and the app - Source

Nubank entered the market with a no-fee purple credit card and an intuitive mobile application that offered real-time spend alerts and around-the-clock chat support. This product and user-experience proposition took the bank to more than ten million clients well before Brazil launched its open finance regime in 2021. Nubank specifically built their own internal credit scoring model utilising both publicly available credit data and alternative data sources. Since then, Nubank has become the largest consumer of the country’s open banking APIs, receiving forty-six percent of all data calls, but those rails amplified an advantage that the company had already secured through brand and service rather than creating it.

KakaoBank | South Korea

KakaoBank leveraged the reach of KakaoTalk, the country’s dominant messaging platform, to offer one-minute account opening and social style peer-to-peer transfers, surpassing one million customers within days of its 2017 launch. South Korea’s open banking switchboard went fully live only in late 2019 after a pilot that logged about five and a half million linked accounts; KakaoBank integrated those APIs to aggregate balances from rival banks, but the institution had already captured a large user base through its distribution channel and design approach.

Alipay | China

Alipay grew out of Alibaba’s escrow checkout service and evolved into a comprehensive super application that now serves more than one point three billion users worldwide. Its scale rests on a closed QR-code payment network and the rich behavioural data generated inside the wider Alibaba ecosystem; traditional banks supply funding pipes but receive little reciprocal data. Chinese regulators are currently requiring Ant Group to place key credit information in a state-supervised joint venture, illustrating that Alipay’s growth was achieved outside any open banking framework and is now being moderated by policy rather than market led data sharing.

Monzo | United Kingdom

Monzo’s famous coral card - Source

Monzo reached the one-million-customer milestone in September 2018 through a brightly coloured prepaid card, transparent foreign exchange pricing and a referral programme that fostered a visible community around the product. The United Kingdom’s open banking mandate had just gone live earlier that year, but Monzo’s early momentum came from product design and word of mouth. Data aggregation through open banking APIs arrived later as a premium feature for customers willing to subscribe to Monzo Plus, so open banking was an enhancer rather than a catalyst for the initial adoption curve.

OPay | Nigeria

OPay entered the Nigerian market in 2018 with a mobile wallet tied to an aggressive physical agent rollout, reaching roughly forty thousand active agents and five million dollars in daily transaction value within its first year. The company has since reported more than fifty million wallet users by 2024, growth aided by fee waivers, smartphone preload agreements and extensive on-ground marketing. Nigeria’s Central Bank approved operational guidelines for open banking only in March 2023, well after OPay had established its customer base, so the firm’s early scale reflects distribution economics rather than benefits derived from shared API data.

Verdict

Across all five cases the decisive early advantage was distribution or user experience, agent networks, viral cards, messenger reach or super-app stickiness not regulatory data portals. Open banking has since become a growth amplifier for Nubank and KakaoBank and may eventually reshape M-Pesa and Alipay, but none of these firms needed shared API rails to acquire their first million users.

The broader point is very simple. Competition in financial markets doesn’t need a regulatory mandate, businesses emerge to solve specific pain points in a unique and profitable manner. Therefore it's specious to argue that open banking will increase competition and innovation. Philosophically I’m always sceptical of the role that government officials or mandates can have on competition or innovation.

Better Lending Outcomes