New research reveals an increase in spending among Europe’s financial executives, with 47% saying their Open Banking budgets have risen in 2021.
This follows a challenging year in 2020, where financial institutions battled budget restrictions against the race to serve more customers digitally.
Tink’s research – based on 308 senior decision makers at financial institutions in 12 European countries – found the Covid-19 pandemic impacted budgets for 93% of financial institutions, with almost a quarter (23%) revealing the impact was significant.
At the beginning of 2020 executives expected to spend, on average, €50-100 million on achieving their Open Banking objectives. With the huge challenges of the pandemic, the average spend landed at €32 million in 2020.
Retail banks and wealth management firms bucked this trend – spending, on average, €84 million and €79 million respectively on their Open Banking objectives in 2020.
This discrepancy in budget allocation was likely driven by the need to put significant investment towards the creation of compliant PSD2 APIs, as well as the task of overhauling legacy infrastructure to meet current and future Open Banking needs.
2021 investments fuelled by the shift to digital
A breakdown of the data reveals how Open Banking investments have increased during 2021, with wealth management firms experiencing the strongest increase in budgets (58%). This is followed by wholesale banks (55%), credit providers (51%) and challenger banks (50%).
The research goes on to look deeper into the areas these investments are being prioritised towards, the findings reveal that payment related services top the spending priorities in 2021.
Specifically, 72% of financial institutions see payment initiation services as the most important use case to their business. This suggests increasing awareness of the need to develop payment solutions that provide more streamlined services for customers.
Improving the customer experience and onboarding process was the second most important area of enhanced banking use cases this year – with account verification, identity verification and asset verification equally weighted amongst 71% of executives.
These use cases not only make it easier for banks to make more informed credit decisions for their customers, due to the real-time, holistic view of their data, they also make it simpler for users to switch or sign up with new financial services providers.
The deployment of risk-related use cases is also considered extremely important, with risk and creditworthiness assessments a priority for over two thirds (71%) of financial executives.
Although carbon footprint calculation appears at the bottom of the list, it’s still a highly relevant use case for most respondents (62%) – particularly when you look at the retail banking segment, where it ranked as the fourth top priority overall.
“As Open Banking moves towards mainstream adoption, we’re not surprised to see investments in data-driven initiatives increasing. Financial executives have set their sights on a broad range of Open Banking use cases, from payments to credit assessments to carbon tracking, unleashing a new wave of value creation that both consumers and businesses will benefit from,” says Daniel Kjellén, co-founder and CEO, Tink.
“As we look to 2022, the findings of this report suggest that financial institutions should move fast, as open banking is tearing down barriers and allowing new players to enter the market.
To keep a competitive edge, it’s important to focus on enhancing the core business, and consider working with partners to create open banking solutions that can drive value across all areas of financial services. Creating an ecosystem of players that work together will be crucial as we move towards a new age of digitalisation and enhanced customer experience.”
The post Payments and CX key to Open Banking as banks start to spend on infrastructure appeared first on Payments Cards & Mobile.
