Banks are displaying a worrying lack of commitment to driving forward their Open Banking plans, according to a report.
The 2019 Innovation in Retail Banking Report, authored by financial strategist Jim Marous for Efma and Infosys Finacle, found only 26 per cent of global banks are evolving towards an Open Banking model or platform.
The report includes interviews with more than 350 banks and credit unions. Over half of respondents (51 per cent) admitted to being ‘mainstream’ or lagging in innovation.
While over three-quarters (77 per cent) of banks stated an intention to increase their level of investment in Open Banking APIs over the next two years – with the majority also planning to focus on co-innovation with fintech startups and technology firms – doubt remains over banks’ willingness to leverage this technology fully.
Only 35 per cent stated their level of readiness for Open Banking APIs and advanced analytics was high or very high, while 34 per cent admitted their level was low or very low.
“Many financial institutions are somewhat overwhelmed by the prospects of delivering on the Open Banking promise. The paradox exists between the desire to deliver more integrated solutions while being transparent around the sharing of data between multiple organisations,” the report states.
However, it also found that banks recognise the need to change their strategic priorities over the coming years as digital innovations continue to increase competition in the sector.
When asked which digital technologies would have the greatest impact on banking in the near future, banks put mobile technologies at the top, followed by advanced analytics and Open Banking APIs. The desire to build greenfield digital banks was mentioned by 36 per cent of respondents.
However, this strategy could hold organisations back, the report concluded.
“We have recently seen the closing of some digital banking initiatives, such as Finn by [US bank] Chase, where the digital bank was never given the freedom to succeed away from the legacy organisation,” it said.
Marous added: “While progress has been made in the areas of digital transformation, progress is exceedingly slow. In fact, there are indications that many organisations are not fully understanding the scope of change required.”