The evolution of open banking in 2017 and the road ahead

3 min reading
The evolution of open banking in 2017 and the road ahead
The evolution of open banking in 2017 and the road ahead


On the eve of the mass arrival of new regulations in the European Union and a change of pace in international banking, it's time to look ahead and assess what the main immediate challenges of this new way of managing financial data will mean for businesses and citizens.

According to a study published in June 2017 by the Open Bank Project and conducted through interviews with managers and executives in the financial sector, most companies expected in the next 12 months increased productivity and efficiency, greater innovation with third-party contributions and greater agility. 

32.4% of respondents indicated that they would end 2017 using open APIs in their systems, which is slightly higher than the previous year’s figure. Regarding the future, 52.6% of the respondents stated that they consider launching an open or partner-only API initiative in 2018, indicating that there is a financial banking sector that was already prepared in advance and another that is considering accelerating the adoption of new APIs from now on.

Open Bank Project

European banking systems have a comparative advantage over their American and Asian counterparts. A more favorable regulatory framework in the old continent eliminates barriers to adopting open and internal APIs. Only 48% of those surveyed by the Open Banking Project saw bureaucracy as an obstacle to moving ahead, compared to 69% in the United States and 64% in Asia. Europe is also at an advantage in terms of knowledge of the actual technologies, especially compared to the Asian financial market.

The challenges of implementing APIs have remained unchanged in respondents’ responses, but overall concern has decreased. In 2017, there has been a larger budget to implement measures and suspicion of new external regulations has diminished. The main challenge remains the lack of internal understanding to initiate initiatives with APIs, either by creating or adopting them. 46% cited a lack of experience with APIs and uncertainty about the details of  PSD2. PSD2 appears to be one of the main drivers of API adoption, as expected. The entry into force of the regulatory framework should encourage companies that had fallen behind. 

According to McKinsey’s finance department, PISPs (such as AliPay or Klarna) will have a much more apparent role to play in 2018 with the advent of PSD2. Some like Klarna have even opted for a traditional banking license. The consensus, cites McKinsey, is that PISPs will be the driver for more innovation and disruption.

As for the cited benefits, improved customer service and rapid-prototyping of new services continue to be at the forefront of executives’ and managers’ minds. More than three quarters of respondents said that they expect to be able to better manage the customer through new APIs, either through their own applications or by allowing them to manage their financial data from external platforms.

Open Bank Project

The consensus of the executives surveyed continues to be that banking will undergo a transformation toward being a platform provider, giving third parties access to an ecosystem of services built on top of it. Other financial companies hope to become aggregators of financial services, integrating these services into a new digital experience where the banks providing the best services and the best experience for customers would be the winners.

Educating end users and customers on data permission and privacy of their data “will be the most complex line for financial institutions.” This is one of the conclusions of the aforementioned McKinsey report. Further complicating matters, real-world evidence suggests consumers may not attach the same value and sensitivity to certain data elements that banks and their regulators do. This is a future challenge for the communication and marketing departments of financial institutions of both established organizations and start-ups.

Finally, some of the responses indicate that there will be a differentiation between the “old bank” that will only hold the money, and the “new bank” that will be an app-driven provider of value-added services. This tandem could serve to retain customers who are not looking for or taking advantage of all the benefits of the new open bank.

An open bank that is expected to reduce the costs of switching banks, or enable customers to keep their portfolio divided between a wider selection of products from different banks. This is where traditional banking adapted to the future of open banking and fintech startups that have been founded in this new ecosystem will actively compete.

In short, the responses indicate that 2016 and 2017 have been a turning point for open banking, with the majority (52%) of professionals consulted recognizing that they are considering launching an open or partner-only API initiative. Reduced operating costs, the ability to offer improved customer service and the possibility of opening new revenue streams remain the main reasons for adopting open banking in the years to come.


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