The Global Open Banking Report 2020

21 Oct 2020

Open Banking paved the way for a new generation of financial products, giving consumers more choice and control over their financial lives, and driving competition in the financial industry.

With Open Banking, banks also have a unique opportunity to create products and services that solve corporates and SMEs’ pain points and improve their services. To do this, banks will need to do more than deliver their existing products better. They will need to enhance their digital and data analytics capabilities and develop an ecosystem of partners to improve personalisation and deliver more value-added services beyond simply meeting their financial needs.

The advantages for corporates and SMEs can be enormous, particularly in areas including holistic finance management, account aggregation, creditworthiness assessments, cash flow and liquidity management, credit risk scoring, streamlined B2B payments, automated onboarding and identity verification, lending, account information, invoicing, tax digitalisation, cash forecasting, lending, accounting, payment tracking, request to pay etc.

The Global Open Banking report analyses the use cases already driving value for consumers, SMEs, and corporates and those that hold great potential.

Open Banking and the path to Open Finance and Open Data

While Open Banking continues to gain traction all over the world, foundations are being laid for the next wave of financial innovation: Open Finance.

The Open Banking report tracks the journey from Open Baking to Open Finance, the potential and the impact of Open Finance on different areas of financial service, all while providing provide key considerations for Open Finance to become a reality and key insights on how an environment that supports the safe and robust development of the data economy is essential for banking transformation.

The success of Open Finance is dependent on customers being prepared (educated) to engage and willing to allow third party providers access to their financial data. The challenges associated with Open Finance are similar to those of Open Banking but with a great focus on data access, fragmentation, the misuse of data, appropriate consumer protections, and a growing need to building trust with users.

Essentially, Open Finance should make space for competition and innovation beyond the regulatory minimum. Beyond simple compliance is the potential for banks to open up a wide array of APIs and services that exceed the minimum levels mandated by legislation. Open Banking enables the development of premium APIs, which, when fully developed, can crucially enable Open Finance by allowing data sharing practices to be effectively applied to a plethora of new sectors.

Open Banking is being shaped in different geographies

Initiatives across different jurisdictions have emerged to make Open Banking/Open Finance a reality, ranging from direct regulatory requirements to market-coordination and industry-led initiatives.

In this fourth edition of The Paypers Open Banking Report, The Paypers analyses how Open Banking has evolved around the world, by developing insight into the Open Banking initiatives in key markets including the UK, US, Europe, Asia, Asia-Pacific, Latin America, South-Asia (India), Africa (Nigeria).

How to build the Open Banking ecosystem in an agile and secure way

To remain competitive, banks need an approach to Open Banking which fosters valuable collaborations with startups and fintech developers. Banks must look to actively partner for success, which means harnessing Open Banking and tapping into partners who are vital to building the Open Banking ecosystem. Partnerships and value co-creation with other players will pave the way to the banks’ overall mission to transform innovation into superior customer experience.

Banks seeking to claim a solid position in the Open Banking landscape will need to move beyond merely offering high-quality documentation, sandboxes, developer tools, and seamless access to APIs. Most importantly, they need to build, grow, and nurture their Open Banking community to strengthen their position and accelerate their commercial efforts.

Specifically, banks are in a position to increase the number of developers using their APIs, obtain more direct input and feedback, signal intent for innovation, and collaborate with the aim of developing relevant products and services. Overall, this contributes to better facilitation of API ideation and use-case development to drive reach and adoption among end users.

Addressing the issue of Open Banking and PSD2 compliance and security is also key in building a powerful Open Banking ecosystem.

Lastly, selecting the right API connectivity provider is of utmost importance, as their technology capabilities can assist banks in launching a successful PSD2 proposition for their customers while accelerating the development process and time-to-market. The report dives into some the most important criteria in selecting the connectivity provider, including connectivity reach, functional scope, costs etc.

Global mapping of key players – who’s who in Open Banking

The Open Banking report 2020 features an exhaustive outlay of the Open Banking ecosystem in the guise of a thorough global infographic and industry mapping of the key solution providers in Open Banking and their offerings and solutions.

The global industry mapping outlines the key players’ fact files per each core category as follows:

  • Open Banking enablers
  • API connectivity for payment initiation
  • API connectivity for data retrieval & value-added data solutions and services
  • Consent management
  • TPP checking & repository
  • Bank in the box/banking-as-a-service/core banking infrastructure
  • End-user solutions and propositions
  • Security/Risk management/Fraud

The proof of the pudding is in the eating

The real worth, success, and effectiveness of Open Banking and Open Finance can only be determined by putting it to the test. Just as customers judge the staff, food, and cleanliness of a restaurant, they are also making their own judgments about the services enabled by Open Banking (and their usefulness).

While we recognise the promise of Open Banking (and of Open Finance), the growth opportunities are still enormous and the possibilities for improvement endless.

Open Banking and Open Finance open an unprecedented opportunity to re-design financial services for maximum scalability and efficiency. Players can create new services that are more competitive, give customers more financial choices which are better tailored to meet their specific needs (for example, an open use of data can benefit low-income people entering the financial system).

Banks can lay claim to the role of ‘data custodian’ in their customers’ daily lives by engaging in a cross-sectoral data ecosystem. There are no two ways about it. Banks can either ignore the digital transaction revolution and stick to their existing beliefs, continuing to invest in payments only and competing with bigtech, or they can expand their role as money custodian into the data domain to secure their future relevance in the data economy.

Download the report and learn about the key aspects that are tackled here.