From open banking to embedded finance: The essential factors for a successful digital transformation

Consumers’ needs have changed significantly in recent years, and so have their expectations of financial services. Not only does a large part of their life take place online, but digital apps and products are also integrated into everyday situations. Instead of offering isolated products on a website, companies therefore began to address consumers right at their ‘point of need’ — on e-commerce platforms, in apps from mobility service providers or on comparison portals. Banks can adopt this approach by embedding financial services into the products of non-bank companies, thus offering seamless processes and an increased level of convenience to their clients. Open banking is what provides the foundation for this concept of ‘embedded finance’, by allowing third parties to access banking data via technical interfaces — so-called application programming interfaces (APIs). In 2015, Deutsche Bank decided to take advantage of the opportunities offered by open banking. Through an API programme, the bank enables its partners and customers to integrate banking data as well as financial products and services into their own applications and products. Thus, partners can offer financial services to their customers directly at the point of need. The work of Deutsche Bank’s API Program has provided valuable insights into how banks can successfully open up and even take the next steps towards embedded finance. This paper looks at Deutsche Bank’s experience with open banking and the possibilities and opportunities for embedded finance and presents best practice examples for the necessary internal transformation of financial institutions.