Julien Eichinger - stock.adobe.c

Open banking objectives a decade away for over a third of UK finance firms

The completion of complex open banking initiatives could still be over a decade away for many companies in the finance sector

Over a third of UK financial services firms expect it to take at least 10 years to complete their open banking plans, according to a survey across Europe.

The survey, commissioned by Swedish open banking fintech Tink, which is now part of Visa, found that 34% of firms in the UK expected it take over a decade to achieve open banking objectives, while 28% said it would take less than five years and 38% expected it to take between five and 10 years.

Across the sample countries as a whole, 40% believed it would take between five and 10 years to realise open banking objectives, while 37% expected a decade to elapse.

Spain, Italy and France were the most optimistic about achieving open banking goals in under five years, with 37%, 34% and 30% respectively expecting this, according to the survey of over 300 finance executives in 12 countries.

The report said this reflected a more limited scope for open banking strategies in these markets, claiming they were “focused on short-term compliance-based use cases rather than larger-scale open banking transformation projects”. 

In the UK, while just over a quarter of respondents expected to reach their goals in under five years, the report said more “cautious timescales reflect the size of the task at hand, with many organisations embarking on complex, large-scale open banking transformation projects that will take several years to realise”.

Open banking enables third parties to access the customer data held by banks via application programming interfaces (APIs), if customer consent is granted, and offer services using this information. For example, a company, with your consent, can take a payment directly from your account without you leaving its website. These bank-to-bank payments remove fees, do not require customers to have their card and are faster than normal payments.

The Tink survey also found that positivity around open banking across Europe has increased from 55% in 2019 to 71% currently. In the UK, 81% of those questioned were positive about open banking – only executives in Belgium (87%) and the Netherlands (85%) were more positive.

“We know an open banking revolution won’t happen overnight and we recognise that the pace of change may be slow as institutions grapple with complex transformation projects that could take over a decade to deliver”
Daniel Kjellén, Tink

Challenger banks and wealth management companies were the most confident about reaching their open banking objectives in under a decade, at 75% and 74% respectively, while mortgage and credit providers were the most cautious, at 55% and 56%.

Daniel Kjellén, co-founder of Tink, an early pioneer of open banking, said its predictions were coming true and most European financial firms wanted to embrace “open banking’s true potential”.

“But we know an open banking revolution won’t happen overnight and we recognise that the pace of change may be slow as institutions grapple with complex transformation projects that could take over a decade to deliver,” he added.

Kjellén made the point that legacy IT infrastructure was partly to blame for the slow pace of reaching open banking goals. “It’s not because of a lack of appetite on the part of financial institutions – many find themselves held back by legacy infrastructure or technological challenges,” he said.

According to Kjellén, fintech partnerships could negate the need for lengthy projects to overhaul legacy IT. “Rather than embarking on in-house transformational projects, which can take a decade to come to fruition, smart partnerships can shortcut timeframes and leapfrog legacy systems, allowing institutions to reap the rewards of open banking earlier than they might realise.”

Read more about open banking

  • Competition and Markets Authority requests feedback on proposals to increase competition in the UK banking sector.
  • Competitions and Markets Authority opens up the banking apps market following investigation into how to create greater competition in banking.
  • Open banking is a relatively new concept, having come into effect in Europe only in the last couple of years. So what is the state of play?

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