Just a quarter of banks believe their compliance processes are fully ready for Open Banking, ahead of the introduction of new PSD2 rules set to come into force this week.

A survey of more than 200 IT decision-makers from the UK and US’ largest financial institutions by Cloud Elements found that with the deadline for next tranche of Second Payments Directive (PSD2) looming this month, less than 29 per cent of FinTechs believe they have their compliance in hand.

Open Banking uses open Application Programming Interfaces (APIs) to share financial data with third parties in order to provide more seamless, customised digital services to the customer.

The survey found that cultural issues are the predominant drivers behind the slow adoption of Open Banking practices for more a third of respondents, with risk aversion and legacy issues also at the top of list.

One in four financial services institutions are still too scared to commit to Open Banking, with this scepticism starting at board level. For the majority of chief executives, a lack of corporate vision (26 per cent) as well as broader legacy issues (29 per cent) are the biggest challenges when it comes to Open Banking.

However, for those in the chief technology officer role, the top stumbling blocks to Open Banking adoption are staff (32 per cent), insufficient budget (32 per cent), along with a lack of time, skills and resources (32 per cent).

Furthermore, the survey found that incumbent banking institutions are less confident of their preparedness for Open Banking than their more nimble FinTech rivals. Three in five financial services firms believe challengers are better able to deploy Open Banking. This is a sentiment felt by 69 per cent of banks, compared to 52 per cent of FinTechs.

Mark Geene, chief executive of Cloud Elements, said:“With PSD2 being rolled out in September this year - following in the footsteps of Open Banking legislation last year - it is intriguing to see the different perceptions of IT decision makers about their main challenges to Open Banking."

He added: “Once customers start seeing the positive impact of Open Banking, Financial Institutions will quickly shift their thinking. A more innovative mindset can be adopted using effective API technology - something FIs will need to do sooner rather than later.”

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