Open banking, once introduced as a revolution in banking by allowing for free movement of customer financial data, is currently one of the hottest topics in FinTech Advocates say it could democratize data and fuel a fintech revolution. But…. reality often fails to live up to its potential and the dream, as open banking has been received with an underwhelming adoption rate, non-cooperating banks, and unimpressed regulators.
In the UK, there are only around four million users, which falls short of the predictions to hit 33 million users by next year.
Open banking can be key in unlocking huge opportunities. McKinsey reports that open banking could contribute 1 to 1.5% of Europe’s GDP by 2030. But it also found that only 10% of that value is unlockable today. In addition, Accenture reports that $416 billion in revenue might be unlocked within the open banking global market.
Given open banking’s potential, this is what our experts have to say about the roadblocks standing in its way:
First and foremost, data sharing needs to be standardized. Currently, there are thousands of banks in Europe, and each one has its own API.
Open banking can be key in allowing apps to intercommunicate seamlessly by logging onto your bank app. Companies like Innopay are working on standardizing data and facilitating more seamless data sharing.
Open banking has received quite a backlash so far. It is clear that banks are uninterested to invest in promoting and fine tuning an open banking offer given that they are simply mandated to comply without profiting from open banking at the moment.
Because sharing banking details is so counterintuitive to consumers, there is also an issue of data security here. Recent research revealed that 42% of US consumers are suspicious of how secure their shared data really is.
We dedicated an entire article just addressing consumer concerns with open banking recently, hence we highly recommend you check it out if you want to learn more about this particular challenge.
To conclude, we want to emphasize that despite its slow growth, open banking will inevitably become the new norm.
As for banks’ cooperation, we believe that once Open Finance is rolled out, banks will finally see the profitability of open banking, and will therefore be more eager to attract customers to new open banking solutions.
Finally, are you comfortable with sharing your banking details with third parties?
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