For banks, fintechs, and third-party providers, open banking is poised to spur competition and innovation in the ecosystem, generating new revenue models.
“Open Banking technology allows consumers and small businesses to connect their bank accounts with authorised third parties in a safe and secure way." (Openbanking.org.uk)
The major driver for open banking in Europe has been the enforcement of the Second Payment Services Directive (PSD2).
Two years after its implementation, not much has been done beyond mere PSD2 compliance. Open banking adoption rates remain low, especially among smaller European banks.
But the exciting opportunities of open banking are yet to unfold.
To help you keep up with the most valuable content on the topic from across the web, we have hand-picked this list of 5 useful resources. Enjoy reading!
A truly insightful report about the value of Open Banking for consumers in the UK (individuals and SMBs). The report provides an overview of what consumers need from the market, what the market needs from Open Banking and what Open Banking needs next.
The UK has been at the forefront of Open Banking not only with the EU's PSD2, but also with the regulatory mandate of the UK Competition and Markets Authority (CMA) Order.
The authors segment consumers based on their resilience to small financial shocks and whether they have unsecured borrowing or not, exploring these profiles in detail.
The report finds that, within a year, individuals could gain £12bn from Open Banking-enabled services and solutions, while small businesses - 5.7m. The latter could be achieved only if the products are more closely tailored to consumer needs, engaging them more meaningfully and enhancing their lives at the right time.
Some open banking adoption highlights include:
- A growth from 104 regulated providers in Jan 2019 to 204 in Dec 2019
- 1.25bn API calls within the ecosystem pointing to the vibrancy and frequency of customers using Open Banking
The progress of open banking is not visible to end consumers yet, as Sarah Kocianski comments in her article.
The author gives us an overview of the first implemented use cases of open banking, such as real-time credit worthiness checking, facilitating savings, helping financially underserved communities, etc.
Account aggregation has taken off, but payment initiation APIs are just starting to be used for moving money between a customer’s accounts.
So far, the winning parties in the ecosystem are the infrastructure players, or (technical service providers - TSPs), which offer services to both the third party providers and the account providers.
4. Chris Skinner’s ‘The true meaning of Open Banking’Chris Skinner suggests that a winning path for banks in the open banking era is to become curators of open marketplaces that remove the friction from bank processes.
He also points out that too often people mistake frictionless payments for frictionless banking.
Chris Skinner is known as one of the most influential people in technology, an independent commentator on the financial markets and fintech through his blog, the Finanser.com, author of bestselling books, and more.
For any of our readers unfamiliar with PSD2 and its implications, we’re adding one of Accenture’s most detailed papers on the topic.
The paper describes what PSD2 means, what are Payment Initiation Service Providers (PISPs), Account Information Service Providers (AISPs), how PISPs and AISPs are disrupting existing interaction models between customers and banks, etc.
A particularly insightful section suggests four primary strategic options for banks in the open banking era. To succeed, banks should transform from a utility provider to an ecosystem-enabled ‘everyday bank’, centered on the customer.
Succeed in Your Open Banking Journey with Software GroupAt Software Group we help traditional financial service providers leverage the opportunities of open banking.
Our Enterprise Integration Platform enables banks to comply with PSD2 through API-readiness, Strong Customer Authentication (SCA), and more.
It also empowers banks to deliver on their open banking strategies beyond PSD2 compliance, such as monetizing APIs and data, aggregating 3rd-party service in the ecosystem, etc.