The Open Banking Virtuous Cycle

In my recent blog article I suggested that open banking applications display the characteristics of platforms such as Uber; they consummate matches among users and facilitate the exchange of goods, services or social currency, enabling value creation for all participants. In the case of Uber, the platform matches riders to a driver. In the case of open banking platforms they match consumers (PSUs) to a variety of value units depending on the business model of the third party provider (TPP):

Product comparison:

  • A recommendation on new financial products

  • The ability to initiate product switches

Money manager:

  • Alerts on pending transactions and balances

  • Avoidance of fees and charges

  • Ability to sweep money

Neo bank:

  • Niche banking services not available from commodity banking products


  • Niche payments services

  • Loyalty points programmes

The key characteristic of a platform business model is that the more users of the platform there are, the more value is created for the participants. This is known as the virtuous cycle and was originally applied by David Sacks to the Uber platform model. In the Uber virtuous cycle, the key network effect was identified as geographic coverage, ie the more drivers participate, the greater the geographic coverage and the greater value provided to the riders. A rather famous 'napkin' drawing depicted this (readers please google "David Sacks napkin sketch").

An adaptation of this cycle is proposed and represents the equivalent 'virtual napkin' for open banking.

Open Banking Platform Virtuous Cycle

The above diagram illustrates the suggested key network effects of a TPP open banking platform.

The central hypothesis of the model is that the value to each of the participants grows in relation to the growth in account data.

The cycle works as follows:

  1. Demand is created as fintechs propose new open banking propositions based on customer insights

  2. Account data accumulates as PSUs consent to use open banking propositions

  3. PSU demand can eventually act as a catalyst to drive changes in the regulation or for ASPSPs to voluntarily provide access to more account types leading to greater and more diverse data

  4. Increased consent and widening of account scope leads to richer and broader account data and further potential for better customer insights

  5. Go to 1

The value growth for each of the participant types is summarised as follows.

  • TPP: Increased revenue from new innovative products derived from better insights from the payment account data;

  • ASPSP: Increased customer and payment account volumes from the provision of new products tailored to open banking characteristics;

  • PSU: New and innovative services to help money management and provision of convenient access to payment services;

This model poses further interesting question relating to the reach of open banking platforms and the limitations imposed by the scope of the regulatory jurisdictions and the lack of uniform standards.

Read about this and other open banking topics at Triari Consulting website.

About Triari Consulting

Triari Consulting exists to solve the complex problems arising in payments system modernisation - issues facing clients both large and small. Our unique approach is not only what differentiates us, but also what makes us successful. We provide a focussed range of architecture and strategy services to help financial organisations facilitate changes in payments system processing, to achieve their vision and optimise their performance and productivity.

If you would like to explore our service offering in more detail, please contact Gary Farrow at or call +44(0)755 442 3099 to discuss.