7 Successful Open Banking App Ideas to Inspire You to Create Your Own Startup
Over the past few years, financial technology has stepped up a gear. Modern customers now want an easy-to-use service that’s “adapted” to their needs, and open banking makes it possible. In this article, we will explain how open banking works and list some of the amazing use cases by fintech startups to inspire you to create your own.
What is open banking?
With the number of fintech startups skyrocketed in the last several years, customer expectations from the banking sector are higher than ever.
As app developers, we at Surf know how crucial it is for banks to constantly update their digital products. In 2020 we created the first Flutter banking app in Europe for one of our clients. We used Flutter, the cross-platform technology, to speed up the process and create the app both for Android and iOS.
As users quickly get accustomed to a wide range of new products and services, the competition between banks and fintech intensifies. Open banking, however, turns them into allies and lays the foundation for new apps and services.
Open banking is a system that connects banks and third parties enabling them to exchange financial information using application programming interfaces (APIs). Users are able to authorise the connection to their banking providers and enjoy services that help them automate their savings, open a new bank account and apply for a credit card in a few clicks, and so on. With this technology, banks can also commercialize their infrastructure and move into the BaaS space.
How is open banking regulated?
September 2019, Payment Services Directive 2 (PSD2) regulation encouraging the use of APIs came into force in the EU. UK version of PSD2, an Open Banking initiative led by the Competition and Markets Authority (CMA) mandated that 9 of the biggest banks in the UK should grant third parties access to customer payment account data in a secure form after the customer’s consent. A number of other countries are also introducing measures to push banks to open up their architecture.
When working on a new app, you should closely review local legislation to determine whether you need to be authorised by a national competent authority to provide services enabled by open banking APIs.
How do open banking APIs work?
APIs are a set of codes and protocols that decide how different software components should interact. They allow third parties to get access to the users’ accounts information via a bank-maintained authentication token while keeping credentials private.
The Open Banking Standards define the security-first approach to sensitive data. These comprise:
- Technical API Specifications—they set security and messaging standards for the transfer of data;
- The Customer Experience Guidelines—they help to create a smooth user journey that allows users to easily provide informed consent;
- Operational Guidelines—the performance standards required for the technical infrastructure.
What can you do with open banking?
We picked 7 great use cases of open banking mobile apps that you can get inspiration from.
Mint: different bank accounts on one screen
Mint aggregates all user’s accounts in one interface to keep their clients on top of their accounts, bills, and subscriptions. The app is available for iOS and Android users. Mint helps to set the budget, track expenses, set saving goals, monitor credit scores, and such. After downloading and linking the accounts, the user’s financial data and transactions are automatically synced. The transactions are auto-categorized into predefined categories. Mint’s dashboard gives a quick summary of personal finances at a glance.
Launched in September 2007 Mint signed up more than 40,000 users in the first two weeks and now has more than 15 million users. It won $50,000 in the TechCrunch40, a demo derby run by angel investor Jason Calacanis and later won best in show at Finovate 2007, a personal-finance confab.
Being free to sign up, Mint has a fully integrated revenue model. It partners with financial services companies such as ING and Discover Card, which pay for new sign-ups. It also gets a referral fee from placing sponsored offers.
Spendee: income/expense tracking
With this personal finance and budgeting app, users can track their finances and keep themselves from going over budget. Synced with bank accounts, Spendee automatically tracks income and expenses and creates graphics for each given month in the “Overview” section to help visualize where the user’s money goes. Users can set a spending limit for each category.
Spendee offers 3 packages including the free version that requires manual input of the expenses. Spendee Plus will cost $14.99 per year and offers unlimited cash wallets and unlimited budgets. A yearly subscription to Spendee Premium package with the automatic expense categorization costs $22.99.
Started as a side project of app development agency Cleevio, Spendee quickly hit an 80,000 downloads milestone in the first three days. In 2017 it was accepted into the Google Launchpad Accelerator and raised a $500,000 investment.
Digit: automated savings and investing
Digit is an app automatically saving and investing money on its user’s behalf. After being connected to a bank account, the app’s AI analyzes the account balance, recurring invoices, income, and spending habits. When a user can afford it, Digit automatically transfers money from their checking account to Digit account to help them save the perfect amount of personal finances. The membership costs $5 per month.
Digit is compatible with over 2,500 banks and credit unions but is only available in the United States. Apart from saving money, Digit furthermore sets an Individual Retirement Account (IRA) to invest some of the excess funds.
Founded in 2013, the company helped to save users a combined $5 billion and was assigned a post-money valuation of $277.5 million. Digit makes money from subscription fees, referral fees, withdrawal fees, and interest from funds residing on its user bank accounts. Notable company investors include Ribbit Capital, General Catalyst, Freestyle Capital, Citi Ventures, Initialized Capital, and many more.
Klarna: fast credit applications
Open banking can significantly speed up credit applications by allowing lenders to gain an almost instantaneous overview of an applicant’s credit history. One of the world’s largest providers of buy-now-pay-later solutions, Klarna, recently reached over 90 million global active users and 2 million transactions a day.
Klarna app allows splitting the purchases into several monthly interest-free payments based on an instant credit assessment. To reduce the application process to a few clicks,the app uses balance and transaction data in the credit scoring algorithm for automated credit decisions. Klarna is now powering over 200,000 retailers globally.
Klarna’s business model includes monetization through charging retailers a transaction fee each time a purchase is made.
Currensea: a direct debit travel card
Currensea is the UK’s first travel money card that is linked directly to a user’s bank account and supports all currencies. As Currensea says, the card helps customers to save up to 85% of the fees from exchange rates and transactions. The card works as an extension of a user’s current account, so they don’t have to open a new one. It also spares clients from the leftover money on a separate account after their trip is finished.
The company was founded in 2018. Its crowdfunding campaign on Seedrs raised 102% over and above its funding target of £800,000 in about two weeks. Later, the project became a finalist for the Nesta Open Up 2020 Challenge and won a £1.5 million prize fund run.
In March 2020, due to a coronavirus pandemic that caused travel restrictions, Currensea had to change its course. They recently developed a first-of-its-kind debit card that enables small businesses to make international transactions through their existing bank account without any bank charges and with low fees. Now Currensea offers three cards, free personal and premium personal options, and a business card option.
Cleo: fun personal finance management with a chatbot
Targeted at young people, a playful finance assistant app and chatbot Cleo uses a more human and user-friendly tone of voice compared with the banks, and spices things up with emojis, and GIFs to help their users obtain healthier financial habits. Cleo’s AI/machine learning-powered app connects to bank accounts, tracks and categorises the transactions, and gives proactive advice and information on customer’s finances. There are options for setting a budget or saving goals activated with a simple text “budget” or “save” to the chatbot. But its most special feature is a great “hyping/roasting” mode. To motivate the user Cleo compliments them for spending less or gives them “tough love” if they’ve gone over budget.
In 2020 Cleo had 4 million registered users and says that it has grown revenue by 400% in the last 12 months. This fintech startup was founded in January 2016 by data scientist Barnaby Hussey-Yeo and has raised $44 million in Series B funding. EQT Ventures led the round, also participating were existing investors Balderton Capital, LocalGlobe and SBI.
Subaio: paid subscription management
From 2013 to 2018 the subscription e-commerce market has grown by more than 100% a year according to McKinsey. However, the more customers it attracts, the more people struggle with cancelling their subscriptions. Subaio solves this problem. It gives users an overview of all their subscriptions and sends notifications every time it detects changes in pricing, all within their bank’s own interface. Customers can cancel any subscription with one click. The app relies on a machine learning algorithm to detect patterns in frequency, amount, merchant name, and more.
Denmark-based Subaio was founded at a hackathon in 2016 by engineers and raised €4 million in Series A funding. The round was led by Global Paytech Ventures (GPT). Subaio saved the clients of one of their partners, bank Nordea, almost 0.5 million euro in the first three months.
Where to start?
Open banking provides endless possibilities for innovation and according to Insider Intelligence, in the UK alone, the revenue potential of Open Banking-based businesses will reach $2 billion by 2024. We hope the great apps mentioned above brought you closer to generating your own fintech startup idea. To plan your next move, you can check out our step-by-step guide on how to develop a fintech app or calculate how much it can cost.
Catch the open banking wave! Surf has been creating apps for major brands for over 10 years and has strong expertise in banking apps development both on Android and iOS. It’s been 3 years since we started using Flutter as well. Flutter is a technology that allows us to use a single codebase for both Android and iOS versions of an app and saves our clients’ time and money. Contact us to bring your fintech ideas to life.
