Key takeaways from the Open Banking Report 2022
Leading digital finance media just released the 6th edition of its renowned Open Banking Report, which aims at uncovering the potential of Open Banking, Open Finance and Open Data. Today, we are sharing our 5 key takeaways extracted from the report, revolving around the ever-growing use of data and to move towards Open Data, as well as new use cases for all industries, notably.
As explained by Lead Editor, Oana Ifrim, “Open Banking continues to power through its way into the financial services industry, as initiatives across the world gain momentum, encouraging competition and innovation”. She also underlines that we are witnessing ongoing improvement in services and customer experiences. As a result, the conversation has now turned to Open Finance: “the idea that customers will be able to take control of their data across all areas of financial services so that new, innovative solutions can be created”.
#01 Existing players step up their game and new players enter the arena
As explained Mounaim Cortet (Director and Country Manager DACH, INNOPAY) and Jorgos Tsovilis (Senior Consultant, INNOPAY), “in response to the rising demand for open, embedded finance, financial institutions are increasingly offering white-label and (co-) branded financial services that other companies can integrate into their value propositions for their customers”.
In their latest Open Banking Monitor, the INNOPAY experts highlight that financial institutions have progressed on their Banking-as-a-Service and product offering. Moreover, the report underlines that:
- Competition is intensifying: banks are making significant efforts in expanding their API product offering, and in improving the experience for API consumers. On the other hand, new banks are entering the arena.
- Growing API product offering: the report underlines a 17% increase in APIs offered per bank. Most Open Banking APIs still focus on core functionality, but adoption is accelerating and spreading to other products and services.
- Improved developer experience: banks are stepping up their game to avoid falling behind their peers. The improvement in developer experience is mainly driven by community development, developer usability and API documentation.
Finally, the two experts shared their main Open Banking trends that enhance the developer experience:
- Consistent experience across countries and markets
- Collaborating through “Partner APIs” or “Mash-ups”
- Flexible API solutions catering for diverging needs
#02 From Open Banking to Open Finance, and towards Open Data
Marie Walker (co-founder, Open Future World) first shares her definitions of Open Banking – which is used to refer to the opening up of payment accounts – and Open Finance, which she defines as “something wider”. The expert explains that the concept of “giving consumers power over their own data” is at the heart of Open Finance. She concludes her part: “Open becomes an accepted – and expected – part of how finance is done, and the blueprint for the coming open data world”.
According to Amit Mallick (Managing Director, Global Open Banking & API Lead, Accenture), “As Open Banking evolves into Open Finance, and ultimately into Open Data, a competitive and collaborative ecosystem will emerge involving banks, tech giants, other financial services industry players, fintechs, and non-banks. This will further accelerate innovation, which in turn will amplify the disruption of the industry landscape”. He also explains that Open Finance and Open Data will become the new normal, that Marketplaces will take the center stage, and that the emphasis will be on data more than APIs. Finally, the Accenture expert highlights that “Companies need to identify the opportunities, develop their strategy, start to build the required capabilities, and partner with the right allies”.
May Lam (APAC Payments Leader and Oceania Fintech Leader, EY) highlights: “while new data sources via Open Banking are giving financial institutions and other organizations like big techs and fintechs access to rich, real-time information to meet this new urgency, without the right people, data, technology capabilities, policy controls, governance, and operating models, data monetization can turn into data liability and loss of brand trust”. The expert also notes that the benefits of Open Data to consumers, businesses, and financial institutions are now apparent, and move beyond financial services to become truly embedded into our daily lives with purpose.
#03 Open Banking initiatives all over the word
In Canada, Abraham Tachjian was appointed Open Banking Lead of The Department of Finance, with the mandate to consult with the industry, regulators as well as consumer representatives. He highlights that the view on Open Banking in Canada has evolved over the last years: “a few years back, the conversation may have centered around the challenges at play. However, in recent conversations with stakeholders, I have noticed the discussion shifting towards the opportunities Open Banking presents. It signals that we are ready to leverage the opportunities presented by Open Banking to help Canadian consumers better their financial welfare”. The next step, as expressed by the government, is to progress the work to launch a made-in-Canada read-only model of Open Banking in 2023.
In Nigeria, Open Banking was initially a grassroots banking ecosystem, but forming a partnership with CBN (Central Bank of Nigeria, that has always been the driver of payments and financial technology in the country) has backed this up with the appropriate regulation. Adedeji Olowe (Founder and Trustee, Open Banking Nigeria) and Malaika Ademola-Majekodunmi (Program Manager, Open Banking Nigeria) explain: “having a collaborative approach between the regulators and the industry, with grassroots participation organized by OBN, ensures that there are regulatory powers to enforce widespread industry compliance while the input of the stakeholders ensures that the guidelines and other rules are beneficial and easy to implement”. According to them, this also creates an avenue for stakeholders to go above and beyond what the regulations say.
#04 Open Banking for SMEs and corporate treasurers
In the European Union, Small and medium-sized enterprises make up for 99.8% of companies in the non-financial business sector. José Vicente (Deputy Chairman, Euro Banking Association) and Daniel Szmukler (Director, Euro Banking Association) explain: “Open Banking initiatives that leverage a broad range of APIs can increase the quality of services by allowing different financial service providers to partner up for the development of richer offerings for SMEs”. Since the implementation of PSD2, many new offerings have been made available for SMEs, and notably lending services, banking platforms, invoicing and payments, business finance management, etc. Open Banking-powered service providers are therefore providing SMEs with tailored and embedded finance. “And they continue to find more innovative ways to alleviate SMEs’ most pressing issue, namely financing, by process innovation and leveraging additional data, the sector also needs to look at collaborative ways to address this issue,” add the experts.
Mounaim Cortet (Director and Country Manager DACH, INNOPAY) focused on how corporate treasurers can leverage open APIs. “Open APIs provide opportunities across all treasury service domains and enable corporate clients to consume banking services directly via their ERP or other relevant standalone platforms,” explains the expert. He adds that APIs can improve the way treasurers work and exchange with their transaction banks. They enable the digitization and automation of processes, the fast and flexible integration to systems, the centralization and embeddedness of bank connectivity, self-service bank account management, real-time and on-demand information to drive data-based decision-making, and finally, they enable transformational solutions. Mounaim Cortet concludes: “the corporate segment is rapidly catching up. This is evidenced by corporates increasingly buying into Open API-enabled solutions to improve their treasury operations”.
#05 More payments use cases and features
Kieran Hines (Principal Analyst, Celent) shared his knowledge on digital payments and more specifically on the market’s growing interest – notably in the UK – around VRPs (Variable Recurring Payments). He defines them as “a form of payment instruction that allows a customer to give ongoing consent for a third party to initiate payments on their behalf.” As the name indicates, VRPs are designed to support use cases in which payments need to be made repeatedly, and where the transaction amounts may fluctuate.
LUXHUB is also featured in this new edition of The Paypers’ Open Banking report, in the “New Frontiers of Payments” section. Read the article written by our Open Banking-powered expert Ramzi Dziri, entitled “Combining A2A Payments with Request-to-Pay”.
Source: The Paypers