The Customer Effect
How open APIs are paving the way for PFMs to succeed in Europe
- UK PFM app is building multiple revenue streams built off data sharing arrangements with banks
- Success of PFMs in the US could depend on the extent to which incumbents implement open banking principles
While bank third-party data sharing (otherwise known as “open banking”) has been slow to take off in the U.S., it’s proving to be a critical lifeline for new personal-finance management tools growing their reach in Europe. On Thursday, U.K. personal finance app Emma -- which just launched in beta in December -- announced a data-sharing agreement with challenger bank Starling Bank. It's the second such agreement this year after a similar one with challenger bank Monzo in January. “We want our customers to have choice amongst financial products and to be able to easily access products and services from across the market, and our open API makes that possible,” Megan Caywood, chief platform officer, Starling Bank, said in a statement. Emma, which recently got regulatory approval, is the latest personal finance platform to use data-sharing integrations to grow its business. Emma is a budgeting app that aggregates accounts, monitors account activity and uses these insights to offer recommendations on how customers can save and avoid overdrafts. Emma so far works with 17 banks across the U.K., working with with data aggregators to “screen scrape” with institutions that haven’t yet opened their APIs. As banks are forced to open up their APIs as required by regulations, it’s a boon for Emma, whose growth model is growing the product’s reach based on insights based on transactional data. “We’re building a tech company, and we understand that the data [play] goes beyond just overdrafts -- it’s about understanding when certain events happen, money can be saved or invested,” said Emma founder and CEO Edoardo Moreni. Emma screenshot The company's two key revenue streams are based off interactions with customer data: referral fees from product recommendations and revenue from future financial products it could launch, including premium features within the app, he added. While certain U.K. banks are dragging their heels implementing open banking, pressure from regulators will force them to comply. This is good news for PFM startups operating there, in contrast to counterparts in North America who depend on one-on-one agreements with banks to share data -- a cultural change that won’t be easy to overcome. “Open banking in a lot of circles means ‘open up the banks and share the data with your competitors,’” Simon Paris, deputy CEO of Finastra recently told Tearsheet. “Does it make sense that Amazon should give all its shopping data to Walmart? Is that open shopping?” For Emma, the sharing of financial data will power consumer interactions that go beyond financial services, including the retail and e-commerce -- additional possibilities that could be built into banking and financial apps. "In five to 10 years, there's going to be an AI that's ubiquitous; you'll be interacting with it through multiple devices," said Moreni. "We can figure out where you buy stuff, where you travel and from there, we can build experiences -- a banking app is a starting point."