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April 17, 2020updated 22 Jun 2020 1:56pm

Banking & Payments Predictions 2020: Open Banking

By GlobalData Thematic Research

Open banking refers to various initiatives, whether top-down, bottom-up, or some combination, enabling customers to share their personal data with other financial institutions or authorised third parties through an agreed process.

Listed below are the top open banking predictions, as identified by GlobalData.

Progress will remain slow, even in markets where open banking is top-down. The Open Banking Implementation Entity reported it had 188 regulated providers operating in the open banking ecosystem, contributing towards 180.6 million API calls in the month of October 2019, and up to 200+ providers and 200+ million API calls in January 2020.

For banks, open banking represents only costs in the short term, through compliance, tech upgrading, additive load from API calls, and all the marketing and research effort to understand what a B2B data business for a bank might look like. But in 2020, incumbents will use open banking more purposively.

However, the unsaid strategy of resistance will continue. We’ve already seen a range of tactics, such as making multiple requests for consent or requiring online authentication instead of One-Time Passcodes to create ‘friction.’ As it is, incumbent banks are changing their APIs all the time, which means a dedicated team of data people from a small startup must stay on top of data access.

In markets like the US, data sharing is occurring bilaterally with a flurry of data-sharing deals, which often disadvantages smaller players in negotiations. This is especially the case if screen scraping, the lifeblood of fintech innovation thus far, goes out when the new agreed APIs come in, effectively giving incumbents more control – not less – over what data is shared when, how, and with whom. A recent dispute between PNC Bank, PayPal, and data aggregator Plaid underlines the points of contention, after some customers lost access to Venmo, a third-party payments app.

The best global banks will drive forward open banking by moving beyond country-by-country regulation to create their own ecosystems and aggregators to enable services. They will deliver compelling digital experiences, either through access to better credit or more personalised advice, enticing customers to share data for even better experiences.

This is an edited extract from the Banking & Payments Predictions 2020 – Thematic Research report produced by GlobalData Thematic Research.