Banking software firm Temenos (SIX: TEMN) has released a report, titled “Open Banking: Revolution or Evolution?”, which was authored by the Economist Intelligence Unit (EIU) and it’s also based on a survey of more than 300 senior banking professionals.
The report revealed that almost half (45%) of banking professionals are now focused on transforming and improving their business models to become all-digital ecosystems and nearly a third (29%) have formulated strategies for adopting Open Banking.
Although banking data is being shared between service providers, the report noted that the global “revolution” in Open Banking is still in its early stages. Quality customer experience and gaining confidence from consumers are considered key to unlocking the real potential of Open Banking services, the report added.
The COVID-19 pandemic has accelerated the shift towards Open Banking and other Fintech services, the report confirmed. It also mentioned that traditional banks might benefit the most from these developments, however, the incumbents must establish proper technology strategies in order to compete with Fintech challengers.
The report further noted that Open Banking could help banking institutions by making it easier for them to more effectively use their own internal data for service personalization, which is a key priority for almost a third (32%) of survey respondents (in the EIU survey).
Regulation has been a major driver in many world regions, especially in Europe and certain Asian and Latin American nations. In other areas, Open Banking has been growing steadily and it is being supported by digital commerce giants in mainland China and Fintech challengers in the United States.
As stated in the report:
“Although 87% of countries reportedly have some form of open APIs in place, laying the foundation for further development of Open Banking depends on the degree of customer confidence in sharing their data, interoperability, enhanced user experience, and the added value of products and services.”
The United Kingdom is now leading the way in Open Banking “owing to regulatory requirements and a dedicated central programme and platform, the Open Banking Implementation Entity, funded by the country’s nine biggest banks,” the report confirmed.
The report added:
“Other regions are following suit, notably Hong Kong, with the APIX API platform; and Scandinavia, with the Nordic API Gateway. Australia, Mexico and Brazil have introduced Open-Banking legislation, while Canada has started the second phase of its ‘consumer-directed finance’ consultation.”
The Coronavirus crisis has “boosted” open banking and the larger financial technology ecosystem, the report added.
The report further revealed:
“New use cases for open banking are emerging, driven mostly by young affluent consumers. In the UK, a survey conducted by YouGov in February 2020 found that 84% of so-called HENRYs (“high-earner not rich yet”) consumers, aged 25-44 with income above £50k) would use a feature making it easier to view recurring subscriptions that they pay for.”
Meanwhile, 82% would “use a feature that would bring together information on all their pensions; 81% would use a feature allowing immediate transfer of money between accounts, regardless of which bank; and 79% would use a feature that would help them to understand their spending by grouping expenses into buckets.”
You may check out the complete report here.