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Cultural Issues Likely Driver Behind Slow Adoption of Open Banking Practices

Cloud Elements released a new report today revealing that Financial Services are paralysed when it comes to open banking. Over half of CEOs believe their competitors to be more advanced than they are, whilst cultural issues such as risk aversion are holding 1 in 3 back in their open banking migration efforts.

The report, titled The State of Open Banking, which gathered insights from IT decision makers in the UK and US’s largest financial institutions, highlights that growing cultural problems – such as risk aversion and legacy issues – are hindering the rate of adoption of initiatives like open banking. One in four financial services institutions are still too scared to commit to open banking, and one in three agree that the greatest challenge to open banking is ‘risk aversion’.

Disparity between board-level opinion shows there is conflict at the top when it comes to open banking

Most notably, however, is the disparity in views from senior executives when it comes to open banking. For the majority of CEOs, a lack of corporate vision (26%) as well as broader legacy issues (29%) are the biggest challenges to open banking. But for CTOs, the top challenges are not enough staff (32%), insufficient budget (32%) and a lack of time, skills and resources (32%). This means there are conflicting views at the top when it comes to the future of open banking within financial services. 

On top of this, their self-confidence appears to be taking its toll. A large proportion (3 in 5) of financial services believe their competitors are more ready for open banking than they are. This is a sentiment felt by 69% of banks compared to 52% of FinTechs. Over half of CEOs believe their competitors are significantly more advanced. Customers, then, could be the ones to ultimately benefit from this new era of innovation wars.

Mark Geene, CEO of Cloud Elements, said: 

“With PSD2 being rolled out in September this year – following in the footsteps of Open Banking legislation last year – it is intriguing to see the different perceptions of IT decision makers about their main challenges to open banking. API technology allows the customer to be linked to various offerings and applications, ensuring they have a more seamless user experience. Once customers start seeing the positive impact of open banking, Financial Institutions will quickly shift their thinking. A more innovative mindset can be adopted using effective API technology – something FIs will need to do sooner rather than later.” 

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