European banks ‘prioritise compliance in Open Banking’

Nearly three quarters (71 per cent) of financial executives are prioritising compliance when it comes to investment in Open Banking technologies.

A YouGov study of 290 financial executives across 12 European countries for Open Banking platform Tink found that when it came to investment strategy around financial data sharing, 41 per cent were prioritising digital identity services.

Tink said the findings showed that financial institutions are continuing to embrace Open Banking led innovation as the pandemic accelerates the digitalisation of financial services, underlining previous research from Tink indicating that European financial institutions are spending an average of €50 to €100 million on Open Banking.

A further 41 per cent said Know Your Customer (KYC) process automation was at the top of their list for implementation of Open Banking, while 37 per cent prioritised transaction monitoring.

European financial institutions are also looking past compliance and exploring improvements to the customer experience, investing in financial management (36 per cent), onboarding process automation (35 per cent) and in multi-banking applications (33 per cent).

The data also revealed that the motivation to invest in one use case over another depends largely on a company's exposure to regulations; but also the nature of the business.

The size and maturity of a business was an important determinant of where money is invested, the study found, with larger institutions such as traditional retail banks (57 per cent) and wealth management companies (53 per cent) ranking digital identity services as the number one area of investment.

Meanwhile, challenger banks and payment service providers (PSPs) were the only two segments where a non-compliance related use case is ranked as the top investment area — with challenger banks prioritising onboarding automation (44 per cent) and PSPs investing in multi-banking services (47 per cent).

Smaller businesses (with 100 to 499 employees) were focussing on streamlining the customer experience, with 54 per cent investing in KYC process automation (compared to just 29 per cent of institutions with more than 1,000 employees). On the other hand, large organisations (with over 1,000 employees) were focusing primarily on digital identity services (42 per cent).

Daniel Kjellén, co-founder and chief executive of Tink, said: “With compliance seen as mission critical to keeping a business running, it is understandable that many financial institutions continue to focus in this area.

"However, with Coronavirus accelerating the shift towards digital channels, financial institutions have a unique opportunity to fuel acquisition and loyalty by further enhancing the customer experience."

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