Open Banking Tech is not to blame for Yolt’s demise claims the Fintech industry

“Open banking is the future.” Who in the fintech world hasn’t heard that phrase at this point? But when (what was thought to be a thriving) open banking company, and one of the industry’s innovators, announces it will be phased out, you can’t help but wonder if the problem was with the product or with the company itself. This is the question we presented the fintech industry as ING announced Yolt, API for open banking services, would be phased out.

Last year Yolt’s parent company, ING, the Dutch multinational banking and finance company, shut down Yolt’s personal financial management app. One year later, the parent company announced that the entire open business-to-business banking business would be shut down, with the aim of completing the phase-out process by the end of April 2023. In a statement, ING said:

“After a thorough evaluation of all options, in the context of the rapidly developing and changing market, ING has concluded that it is not possible to achieve its ambitions with Yolt (formerly Yolt Technology Services). ING and its businesses continuously evaluate activities, including assessing whether they are likely to achieve the preferred scale in the market within a reasonable timeframe. In this context, the evaluation has led to the decision to phase out Yolt.

“Yolt has informed its clients of the decision and the planned discontinuation of their services. Until the termination of the services, Yolt will continue to fulfill its contractual obligations to meet the expectations of its customers.”

Where was the problem?

We reached out to the industry to unpack the news and what it meant for other open banking API players. Who or what was really to blame for the failure?

Ivan MaryasinCEO and co-founder of Moniteaccounts payable automation company, defended open banking technology and pointed out that the era of the super app means there is less room for error: “In the fintech space, we will look back at Yolt‘s folding like a classic, first generation. fintech analogy: you have a promising company with a hot new technology, but it just wasn’t generating enough revenue. They couldn’t connect all the dots and this is because they didn’t connect the dots for their customers.

“We must do more — offer more — in the fintech area. APIs are such now that the era of the niche super app is upon us, and the norm for businesses that need 10 various APIs and fintech services is now old-fashioned. The problem comes when fintech customers start putting all this magical technology into practice. They often find that onboarding and use is more of a headache than they expected, the offers are diffuse and generalized, and the promises do not keep.

“There is nothing ‘wrong’ with open banking, and I do not think this closure is indicative of any negative trends. Rather, we should take it as a wake-up call. Currently, most fintech providers are leading the way with new technology messages, but customers are left alone to put it all together We need to start leading with solutions to specific headaches and we should provide targeted and complete platforms that serve customers wherever they are‘already working. The time for the fintech super app is here, and there will be many more Yolts if we as an industry do not change our proposition.”

The open banking industry has often been referred to as overvalued in the short term and undervalued in the long term. Although ING’s decision may cause some banks to revise their short-term business plans related to open banking, I do not believe that it will affect their long-term goals. Especially with the EU’s Open Finance regulations around the corner, which should address the current pain points of open banking processes.

Krzysztof Grzeszczuksenior innovation advisor at Netguru, the software development and consulting company, reflected on why Yolt was initially so successful, but identified the central flaw that led to ING’s announcement: “Yolt was one of the early players in this game, with an open banking solution for consumers. After a very promising start that attracted a lot of attention from the industry, the first early warning came after the decision to move from a B2C to a B2B service offering.

“While the Yolt app showcased the potential of PSD2 services and combined them with an attractive user interface, moving to Yolt Processing Services was an entry into an already crowded market. We don’t know what was the ‘preferred scale in their market'” referred to in the ING announcement, but one can only guess that eliminating a service that was long from breaking even was a relatively easy and quick way to improve future quarterly results for ING.In addition, any bank that provides services to other financial institutions always in a more difficult position compared to third parties that have no portfolio of competing banking products, especially when the third parties are heavily funded by large card organizations.”

Roland’s MastersCEO and co-founder of Nordicthe open banking API platform, also defended the technology, saying: “The situation with Yolt is in no way indicative of the success of open banking. Open banking continues its growth globally, and adoption rates for the technology are higher than ever, passing six million users in the UK in May 2022. In the future, we will see open banking becoming an integral part of financial services, used across markets and products. Nordigen is delighted to be part of the journey to further democratize open banking”.