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Open Banking in 2024: Insight from Aryza, Axway, Cashflows, Entrust, Unlimit

It’s a time of reflection and anticipation at The Fintech Times throughout December, as we look back at developments and trends over the last 12 months and forward to the year ahead.

We’re excited to share the thoughts of fintech CEOs and industry leaders from across the globe to 2023’s key takeaways and what we should expect to be top of the agenda in 2024.

Open banking empowers consumers with more control over their financial data and fosters a more transparent and efficient financial ecosystem. In 2024, open banking is poised to enter a new phase of maturity, with growing adoption, diversification of services and regulatory attention.

Becoming more mainstream
 Andrea Varga, Head of Innovation at Aryza.
Andrea Varga, head of innovation at Aryza

The open banking landscape is on the cusp of becoming more mainstream, with a growing number of consumers, businesses, and government bodies embracing its services and applications, suggests Andrea Varga, head of innovation at financial software company Aryza.

“Next year 2024 is poised to be a turning point for open banking,” she says. “The anticipated increase in adoption, diversification of services, and the continued growth of open banking payments signal a significant transformation in the financial sector. This evolution promises to benefit SMEs, consumers, businesses and governments by driving efficiency, transparency, and innovation.

“As open banking moves closer to the mainstream, its impact on the financial landscape will only become more profound, ushering in a new era of financial accessibility and opportunity.

“Regulators and policymakers are also taking note of the transformative power of open banking
payments. As this mode of payment becomes more prevalent, it necessitates the creation of regulatory
frameworks that ensure the security and privacy of customer data. Moreover, open banking payments
contribute to financial inclusivity, enabling underserved populations to access the formal financial
system. This aligns with the objectives of many governments and regulatory bodies around the world.”

A willing market
Laurent Van Huffel, SVP of Financial Services at Axway
Laurent Van Huffel, SVP of Financial Services at Axway

Laurent Van Huffel, SVP of financial services at Axway, an API management and integration software company, believes 2024 will be a big year for open banking.

“It’s encouraging that consumer trust seems to be growing when it comes to open banking and the API technologies that underpin it, because trust is critical to banking. The adoption of open banking in 2023 has been a bit disappointing, but experts in the financial services industry agree that it’s not a matter of if we move toward open banking; it’s a matter of when.

“What bodes well for 2024 is that many consumers are comfortable with sharing their data if it means valuable services and a better experience. Those in the US, for example, seem to be ready for open banking and it’s encouraging to see the CFPB’s proposed personal financial data rights rule, which is slated to start to be enforced next year.

“Unveiled in October 2023, the proposal will move banks away from screen-scraping as a data-sharing mechanism and toward publishing open APIs, hopefully using the FDX standard. That will be a huge boost, and I believe the market is willing.

“The proposed rule is aimed at levelling up the playing field and represents a formidable opportunity for smaller banks and credit unions. For instance, it will make it much easier for consumers to break up with banks that provide bad services by offering data portability just like to can keep your cell phone number when moving to a different carrier. As Gen Z will make up 27 per cent of the workforce by 2025 and are much less loyal than their parents, banks and credit unions need to retain their customers while attracting this vital demographic.”

A mature phase
Hannah Fitzsimons, CEO, Cashflows
Hannah Fitzsimons, CEO, Cashflows

As businesses and consumers alike continue to battle the cost-of-living crisis, Hannah Fitzsimons, CEO of digital payments fintech Cashflows, expects to see a rise in the number of businesses demanding access to customer data.

Fitzsimons commented: “As companies diversify strategies to adapt to the economic climate, innovation in the industry will continue to thrive as companies adapt and evolve. In fact, in early 2024, I predict we will see open banking enter a new phase of maturity.

“With the open banking implementation roadmap being largely completed over the last 12 months, the landscape is ready for consumer-focused applications to take off. While B2B adoption may continue at a slower pace, expect to see deeper collaboration between financial institutions and third-party providers, fostering innovation and competition.”

It’s the wild west
Jenn Markey, vice president of payments and identity at Entrust
Jenn Markey, vice president of payments and identity at Entrust

Open banking regulation in the US is expected to accelerate in the next few years, according to Jenn Markey, vice president of payments and identity at Entrust, the identity, payments and data security solutions company.

“Banks are ambivalent because open banking can potentially threaten direct customer relationships,” says Markey. “Consumers want convenience, but the industry doesn’t want any disintermediation. This friction is set to continue over the next 18 months as banks try to strike the right balance.

“In the meantime, banks must adapt their identity and security frameworks to handle open APIs and new third-party fintech partnerships. As open banking spreads, the cybersecurity landscape will drastically expand. Banks usually aim to consolidate vendors, but open APIs introduce many new access points and players.

“We’ll likely see growing pains as convenience increases but so do breaches and malware. The technology infrastructure needs time to properly secure expanded data sharing. For now, it’s the Wild West until more comprehensive regulations emerge.

“In the long run, open banking can enable secure financial ecosystems where consumers control their data. Banks must collaborate with regulators and fintechs to ensure privacy and transparency. The potential benefits of open banking are huge – it’s inevitable, so proactive partnerships will smooth the transition.”

Driving adoption
Jovi Overo
Jovi Overo, MD Unlimit

Jovi Overo, managing director, UK at borderless payments company Unlimit, also expects to see additional developments in open banking in 2024.

“Customers today demand a frictionless experience from their apps, so as businesses improve streamline, and iterate their products, competition will drive adoption.”

“I predict that fintechs will focus a large portion of their efforts on lowering payment friction in the upcoming year. Fintechs are likely to examine their present user experience closely and expect more from their software, including faster payment processing times, more user-friendly interfaces, and instant feedback systems that allow them to get real-time feedback from customers. Anything that facilitates the customer’s payment process is sure to succeed commercially.”

“Artificial intelligence, which is starting to change the financial services industry, will have three main effects: it will automate complex financial operations for fintech companies, provide personalised services for customers, and advance anomaly and pattern recognition. While automating consumer services will help build public trust, automating more complex financial processes would boost operational efficiencies across the business and free up staff to engage on high-value projects with greater consequences.”

 

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