An updated Open Banking Monitor to start off the year
INNOPAY, one of the leading consulting firms on the topic of digital transformation, updated its renowned Open Banking Monitor. The publication contains several articles that perfectly summarize the major Open Banking trends of the past year. It also focuses on the current state of Open Banking, and highlights that fact that embedded payments are on the rise.
Figure 1: INNOPAY’s updated Open Banking Monitor
The old guards are embracing opportunities
Here are the 3 key findings of the 2023 update of the Open Banking Monitor:
- Community Development is driving differentiation in DevEx as Open Banking continues to evolve. European banks continue to dominate in Developer Experience: the Monitor highlights that ABN AMRO, ING Group, Deutsche Bank, Commerzbank, Nordea, BBVA and more are leading the way (see Figure 1, above). These banks are notably focusing on Community Development, which can be defined as “a way for banks to inform and actively engage their communities of users. It strengthens the bank’s position, and helps grow a community around developer portals while driving innovation.
- Payment APIs are on the rise, while Account APIs remain stable but significant: as explained in the report, “Payments APIs continue to increase in number as well as in scope”. It now accounts for 34% of all observed API functionalities. In 2023, we saw the rise of localized and specialized Payment APIs such as cross-border payments, instant payments, Request to Pay, batch/bulk payments, and more. On the other hand, a significant number of APIs are still related to Bank & Account Information: they account for 23% of all observed API functionalities.
- EU Open Banking is still leading but US Open Banking is catching up: Europe still represents the largest part of available APIs with 50% of the entire share. Yet, the US has been constantly progressing for the last few years: with 14%, North American banks now make up the second-biggest geographic share in the Open Banking Monitor. For instance, the quality of their developer portal has improved significantly (CitiBank positions itself as the Masters of Openness). US Bank and Wells Fargo both have expanded their API catalog, etc. Giants such as Goldman Sachs, JPMorgan and Chase “are slowly revealing their Open Banking offerings”.
Embedded Payments on the rise
The report highlights that “with financial institutions playing a key role within the Embedded Finance value chain, assessing their Open Banking offerings is imperative to develop a comprehensive understanding of the breadth and depth of their services. These offerings serve as key enablers for emerging embedded business models in close collaboration with their strategic partners”.
The experts also underline that Open Banking has served a key role in promoting competition and innovation in the financial industry, with third parties able to access financial data, services, products and infrastructures, through APIs. It naturally started with payment and account information, but a wider range of data such as card, lending, insurance, and more, are becoming increasingly API enabled. This clearly “paves the way for Embedded Finance, providing the financial building blocks which are made available via technical service providers and/or directly at the point of need in an external, client-facing non-financial platform”. In this context, “financial institutions are acting as balance sheet providers within this emerging Embedded Finance value chain, whereas the client-facing platform acts as distributor of the embedded finance service.
Since the publication of the very first Open Banking Monitor, in 2017, both the number and scope of payments APIs have continued to rise. As explained earlier, they account for 34% of all observed APIs, and with the latest regulatory developments in Europe, around Instant Payments, the INNOPAY experts expect the number of such APIs to continue to grow significantly.
Download the Open Banking Monitor
Source: INNOPAY