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Financial Institutions Conflicted but Cautiously Optimistic About Open Banking Opportunity

Open banking was launched to spur innovation in the financial services industry and create a better deal for consumers. But new research published today by open banking platform Tink reveals that European financial institutions still have significant concerns about its impact. Two fifths (39%) see open banking regulation as the biggest current threat to their business model and 56% fear that consumer loyalty towards banks will be significantly reduced as a result of open banking.   

Nevertheless, the report – based on a survey of 269 senior decision makers in financial institutions across Europe – suggests that financial institutions are also waking up to the importance of innovating to remain competitive in the new world order. 

As a result, despite short-term concerns, the data reveals cautious optimism in the long term. Over half (55%) of European financial institutions are positive about open banking, and just under half (45%) see it as an opportunity for their business. 

Barriers persist as open banking deadline approaches

With the final deadline to comply with the PSD2 Regulatory Technical Standard (RTS) fast approaching in September 2019, significant challenges still remain. Regulatory compliance (91%), and access to tech (91%) and talent (91%) top the list of barriers to embracing the open banking opportunity.

The other factors seen as moderate or major challenges associated with open banking include:

  • Finding and collaborating with new partners in the fintech space (90%)
  • Technology, e.g. modernising IT systems (88%)
  • Overcoming resistance from internal stakeholders (87%)
  • Commercialising open banking opportunities (87%)

Daniel Kjellén, co-founder and CEO, Tink, said:

“Technology has torn down the barriers to data and created an opportunity for everyone – incumbent banks, fintech challengers and developers – to build great products. PSD2 and Open Banking regulation are acting as a rubber stamp for this movement.

Understandably, this is causing disruption and uncertainty in the banking industry as financial institutions have had to come to terms with big changes over a short period of time. And while a majority of are starting to recognise the long-term benefits of open banking, there are still concerns and challenges that must be overcome in the race to meet the regulatory deadline.”

Seizing the opportunity to innovate through partnership

For the majority, partnerships are now seen as an important route to overcoming the challenges associated with open banking. Almost half (49%) see fintech partnerships as helping them deliver a better customer experience. Other benefits include access to the latest technology (42%); quicker time to market (40%); and access to talent and knowledge (38%).

As a result, almost a quarter (23%) of financial institutions surveyed are already in a partnership with a fintech, while 51% are planning a partnership in the next 12 months.

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