Open Banking strategy ‘a priority to take on BigTech’
Written by Hannah McGrath
Launching an Open Banking strategy has become a top priority for nearly a third (29 per cent) of European banks as tech giants begin to enter the market, according to new research from Temenos and the Economist Intelligence Unit (EIU).
A survey of 400 global banking executives by the banking software firm and the EIU found that major retail banks are gearing up for the challenge posed by the long-awaited BigTech entry into financial services, with a quarter believing they will be their biggest source of competition by 2020 and 31 per cent believing that this will be the case by 2025.
In the years leading up to 2025, non–banks see technology and e-commerce disruptors such as Google, Facebook and Alibaba (31 per cent) and payment players such as PayPal and Apple Pay (23 per cent), as their biggest non-traditional source of competition.
The survey found that Open Banking is still expected to be a priority in 2025 for 26 per cent of respondents, emphasising the disruptive impact of second Payment Services Directive (PSD2) legislation as it extends into wider Open Data services.
However, the study also found that senior bankers also expect to be prioritising responding to increased regulation (35 per cent), migrating clients to digital channels (29 per cent) and mastering digital marketing (29 per cent) in six years’ time.
While products and services built using Open Banking protocols are viewed as key to growth for those surveyed, the idea of openness and data sharing between partners was also seen significant, with 35 per cent of European bankers saying that acting as a true digital ecosystem - offering both banking and non-banking services that originate either internally or from third-parties to customers and other financial services providers - is likely to be the primary direction in which their business model will evolve.
Steen Jensen, managing director at Temenos, said: “The big question for banks is how to create value in a banking ecosystem that is highly digital, open and disaggregated.
“In order to remain competitive, they must offer customer journeys, digital experiences and innovative products and services that their customers can’t get elsewhere.”
He suggested that this is achieved by “digitally transforming operations, using advanced analytics and tapping into new technologies like artificial intelligence and machine learning”.