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Wednesday, February 26, 2020

Opinion > Tink

2020 vision: Open Banking is open for business

Jan van Vonno, research director at Tink | 15:40 Monday 13th January 2020

Last year was a major one for Open Banking. September’s PSD2 deadline encouraged banks to accelerate their efforts to become compliant, and while the nuts and bolts of the technology did pose a challenge, the opportunity for both banks and third-party providers (TPPs) has finally come to light.

Over the past year, banks have become increasingly savvy of the incredible commercial opportunities and competitive advantage offered by Open Banking and the huge number of possible use cases it offers. For example, PwC's strategy estimates that the UK Open Banking opportunity will reach £7.2bn by 2022. What was once a siloed environment is starting to open up — with more players coming to the table, increased competition and transparency, and greater customer choice.  

So, with an exciting 2019 behind us, what does 2020 look like for Open Banking and what changes can we expect in the financial services sector? 

There’s just no getting over PSD2 

The final PSD2 deadline on 14th September 2019 was the last moment that financial institutions could sit by and watch — now that it’s passed, the time for proper change is here. In short, PSD2 isn’t over yet. We must now think beyond compliance deadlines and recognise that the most exciting and significant opportunities are still ahead of us. Open Banking is the start of a 20-year transformation in the industry — enabling everyone with an idea that’s utilising financial data to build and launch new services.  

This means we expect to see significant upgrades to existing APIs on the market. A ‘just enough’ mentality might have been sufficient to meet September’s compliance deadline, but expectations and demands will only grow, and the technology must adapt and evolve accordingly.  

As a result, we’ll start seeing some significant improvements around the customer journey — giving customers access to user-friendly services offered by both banks and TPPs. Personalised financial dashboards, lifestyle payment apps and tailored financial products and services for each customer will come as standard and at Tink we’re excited to see some of the new products and services emerging in 2020. 

Technology will put the customer front and centre 

Until now, Open Banking has primarily been referred to in the context of multi-banking and money management apps. That’s no surprise given the revolutionary impact it’s had in these areas, however, in 2020, we expect to see a change in tack. 

Instead, this year will be defined by the use of innovative technologies, such as machine learning and artificial intelligence (AI) — with a direct focus on how they can further empower customers. For example, voice-based searching in banking software could help customers easily access banking services and provide a new way of encryption. In that same vein, advanced analytics to help banks preemptively detect fraud could come to the fore by learning the usual behaviour of customers to detect fraudulent behaviour. 

In short, we expect 2020 to see a growing number of banks waking up to the opportunities offered by combining smart technologies and Open Banking as a way to enhance customer services, accelerate customer onboarding and anticipate customer needs. 

There will be a shift from platforms towards marketplaces

Last year featured ‘the race to September’ — a time when banks across Europe invested incredible amounts of capital to create a developer portal with countless PSD2 and non-PSD2 APIs. It’s no surprise that everyone wants this massive effort and investment to be a success to preserve and enhance the customer experience and make way for a powerful new generation of financial services. 
 
Now that the initial PSD2 deadline is behind us, we anticipate that banks across the EU will begin focusing their efforts on ‘consuming’ APIs, instead of ‘exposing’ them — chasing the opportunities that these open doors now offer them. From there, their attention will turn to collaboration and sharing this invaluable data with other companies to achieve financial openness. That means new services and products being launched as bigger banks take advantage of the new changes in legislation, rather than focusing only on meeting the regulatory standards.  

Rather than operating a closed shop, offering only their own set of products and services, banks will become more akin to marketplaces, offering a range of products from other banks and TPPs to their customers. The end result will be better and more personalised customer experiences and a better product to customer match — because end users will be able to choose the provider that best meets their needs. This will truly be one trend to watch this year.

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