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Banks Must Prepare for a Changing Open Banking and Payments Landscape as TPPs Travel Abroad

A key part of open banking is regulated third-party providers (TPP). They act as intermediaries between the bank and the customer. Open banking’s growth has got to a point now that more TPPs are able to offer their services outside of their domestic markets. Konsentus, the open finance ecosystem creator and manager, has revealed which countries are leading the way when it comes to exploring new open banking markets.

In September 2019, Konsentus started reporting on the number of regulated open banking third parties in the European Economic Area (EEA). For the first time since then, over half now have the required permissions to provide open banking services outside of their home-regulated market.

Konsentus’ data reveals that in September 2019, 34 per cent of the total number of EEA TPPs could passport their open banking services to other EEA markets. However, in March 2024, this figure had reached 52 per cent – an overall increase of 53 per cent.

A similar trend is reported for payment services growth. In September 2019, the percentage of EEA TPPs who could initiate payments on an account holder’s behalf was 52 per cent. The number has increased over the last few years and now stands at 66 per cent (241 of the 367 total EEA TPPs).

Understanding how different countries are facilitating the use of TPPs, Konsentus revealed that there are 367 regulated TPPs in the EEA. Germany had the highest number of domestic third parties, standing at 37, while, Italy had the highest number of non-domestic TPPs, totalling 149.

Security is key

The growth in cross-border transactions and the increasing number of fintechs who are authorised to initiate open banking payments on an account holder’s behalf creates additional security risks for banks. These challenges are reinforced by data reported in an EBA Opinion Paper published on 29 April 2024 which states that for both cards and credit transfers “cross-border fraud rates in volume are about nine times higher than for domestic transactions”.

Identifying and validating third parties to protect account data and funds is now becoming increasingly important and banks must prepare to safeguard their accounts in preparation for increased activity as the ecosystem expands to support the transition to open finance and beyond.

Mike Woods, CEO, Konsentus
Mike Woods, CEO, Konsentus

Mike Woods, CEO, Konsentus commented: “In the early years of PSD2, fintechs spent their time and effort building APIs and connecting to the banks. They are now capitalising on all that early hard work, monetising their services and earning revenue.

“Our data reinforces that although quarter-by-quarter change is marginal, the difference is significant when you compare the figures from 2019 with today. Banks must make sure they’re fully prepared to respond to the changing landscape and continue to keep their customers’ data and funds safe and secure.”


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