Regulation is key challenge for Open Banking
Written by Hannah McGrath
As financial institutions approach the September 14 deadline to comply with Open Banking legislation, two fifths of financial institutions (39 per cent) still see regulation as the biggest threat to their business model.
A survey of 269 senior decision makers in European financial institutions by Open Banking platform Tink found that a majority (56 per cent) fear consumer loyalty towards banks will diminished as the legislation opens up financial data sharing with third parties.
As a result of these shifts in the banking landscape, the survey found that that financial institutions are also waking up to the importance of innovating to remain competitive, with more than two thirds (68 per cent) recognising they must now enhance their services to attract and retain customers.
In addition, 61 per cent believe that financial institutions which only do the minimum required to comply with the second Payment Services Directive (PSD2) will lose out to more innovative competitors.
However, despite short-term concerns linked to implementation of Open Banking protocols, the research revealed cautious optimism over the long term, with over half (55 per cent) of European financial institutions feeling positive about Open Banking, and just under half (45 per cent) seeing it as an opportunity.
The respondents did still identify some key challenges ahead of the September deadline for compliance with the PSD2 Regulatory Technical Standard (RTS), led by regulatory compliance (91 per cent), access to technology (91 per cent) and talent (91 per cent).
Overcoming resistance from internal stakeholders (87 per cent) and finding opportunities to commercialise Open Banking opportunities (87 per cent) also ranked highly.
For the majority, partnerships are now seen as an important route to overcoming these problems, with almost half (49 per cent) seeing FinTech collaboration as helping them deliver a better customer experience. Other benefits include access to the latest technology (42 per cent), quicker time to market (40 per cent) and access to talent and knowledge (38 per cent).
Daniel Kjellén, co-founder and chief executive of 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.
“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,” he continued, adding: “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.”