The latest report from Mastercard and Payments Cards & Mobile highlights some of the key changes in readiness when it comes to Open Banking adoption across the UK and Europe. The report examines trends across 10 core markets and highlights what has changed in the last 18 months, along with how each region is balancing the regulatory as well as innovation agenda for consumers.

5 Key Highlights :

  • Open Banking continues to drive change and innovation outside of the regulatory context, with multiple fintechs now benefiting from the lower barriers to entry because of PSD2. However, differentiation still remains concentrated in 3 keys areas; Personal Financial Management (PFM), Identity, On-Boarding and KYC/AML

  • As consumers have higher expectations of using Opening Banking to make everyday banking easier and “aggregated” through a single view of accounts, the burning platform becomes the ability for the industry to standardise Open Banking APIs. In this respect the European landscape is still very fragmented, which is a challenge to not only the fintechs who are looking to drive aggregation services, but also creates complexity for consumers who need to authorise data sharing across multiple providers

  • There is a distinct trend in the market to also look at the underlying commercial structure enabled through Open Banking, with a move from Compliance APIs to Commercial APIs. A clear change in direction as account holding banks re-think how they monetise the offering. This will be a key strategy for a number of incumbent banks to follow as they look to drive ROI from the investment made in PSD2/Open Banking compliancy over the last 2-3 years

  • Countries across the UK and Europe are also showing different approaches in play:

  • The UK is looking to leverage the Open Banking Framework to establish a post-Brexit digital ecosystem for financial services, which is essential for attracting investment into the region
  • France, Italy & Spain are looking at this regulatory change as an opportunity to radically transform the legacy domestic payments infrastructure
  • Germany is looking at the post PSD2 landscape as a broader opportunity for collaboration
  • Denmark, Norway and Sweden are exploring new innovative collaboration models (P27)
  • Poland and Hungary are taking a wider perspective across banking, and looking to drive transformation across the core banking infrastructure, and not just restricting this to payments

  • The destiny of Open Banking, as part of an overall digital banking offering, is very much dependent on the continued implementation of a robust online and mobile communication infrastructure. “In 2019, 72% of internet users in the EU27+UK countries shopped online. The proportion of internet users ranged from 99% in Iceland and Norway to 83% in Italy and 72% in Bulgaria and in Turkey. The proportion of individuals using the internet for ordering goods or services in the last 12 months ranged from a high of 88% in the UK down to 46% in Italy and a low of 26% in Romania….Digital technologies and new consumer demands are gamechangers. Europe’s consumers are embracing mobile devices such as tablets, smartphones and others enabled with the Internet of Things (IoT). Looking into specific data from major European countries, we can see that connected consumers are the new normal for European banks”

What are the opportunities for market participants?

  • Broadening out innovation from traditional avenues such as PFM and on-boarding related areas. Creating broader service offerings to include payment acceptance for online goods and services, or using linking AISP data to working capital solutions that allow for better yield
  • Development of more regional collaboration to create a standardised experience for consumers, more broadly than the P27 initiative in the Nordics
  • Creation of retailer-ready solutions for direct from account payments (PISP) to drive more economic pricing for the acquiring market. This does however need consumer protections to be extended to these types of transactions as are in place for credit and debit cards today

For more information please visit the link below, to access more detailed insights on Open Banking readiness and scope for maturity:

https://openbanking.mastercard.com/readiness-index/open-banking-readiness-index/

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