Nearly half (43%) of all large financial institutions have already adopted Open Banking according to a new report from API-driven identity management company Curity.
The Facilitating the Future of Open Finance report surveyed 200 global financial institutions and employees who are managing the Open Banking (OB) process.
The report reveals that the top three motivators for adopting Open Banking are to increase competitiveness (58%), to deliver new products and services (55%), and to meet customer demand (48%).
Despite these significant drivers for the OB initiative, the results also show some hesitation regarding its adoption. Reasons for hesitation include compliance and security risk concerns (61%), a skills and knowledge shortage (51%) and changing business priorities (45%).
The findings come amid the fourth anniversary of the launch of PSD2, which made Open Banking a regulatory requirement in the UK. According to the Open Banking Implementation Entity (OBIE), there are now 4.5 million regular users of OB.
With the exponential interest in Open Banking, the global Open Banking market is expected to reach $43.15 billion by 2026 according to the report published by Allied Market Research.
With customer acceptance growing, the fact that nearly three-quarters of organizations surveyed (71%) plan to adopt Open Banking in the next 18 months demonstrates the importance of continuing to build robust technical solutions, meet regulatory requirements and preserve business integrity.
The report authors spoke with those managing OB programs about deployment timelines, experiences with OB, as well as their motivations and concerns.
The data paints a picture of the future of Open Finance in key countries. We can see that while 71% of global financial institutions plan to adopt OB in the next 18 months, the same amount have security concerns about doing so.
The data also sheds light on the reasons for adopting Open Banking. The top three motivations for adoption are:
- Competitiveness (58%),
- Delivering new products and services (55%),
- Customer demand (48%).
This report looks at both US and UK landscapes, which paint fairly different pictures.
The UK is marginally ahead of the US when it comes to adoption rates (24% vs. 21%). The lead taken in the UK can be attributed, at least in part, to the regulation-driven approach that the country has taken.
PSD2, published in 2015, is designed to improve customer protection for transactions and support the banking-as-a-service API platform in the UK. This regulation has been a driving force for the adoption of OB in the UK, providing the infrastructure and security necessary to encourage innovation.
The US, however, is led by market performance. While the US Consumer Financial Protection Bureau (CFPB) is fulfilling the Open Banking regulatory needs in America, there is a gap with respect to the regulation available in the US compared to what is already available in the UK.
Despite this, the adoption rate of Open Banking in the US over the next 7 to 12 months is expected to be greater than the adoption rate of the UK (26% in the US vs. 19% in the UK).
While the general security requirements of Open Banking are the same in both countries, the driving forces behind fulfilling them differ.
It is clear that Open Banking is here to make a mark on the financial industry.
The largest security concern amongst financial enterprises is outdated systems that don’t support data sharing (62%), meaning they are unable to comply with new data protection regulations that are imperative to new Open Banking products and services.
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