PEWAUKEE, Wis.–Banks that have moved to open banking have found challenges, but also opportunities for growth, according to a new report.
The report, from Fiserv, studies banks operating in four countries that have mandated open banking– under which banks must adopt open application programming interfaces (APIs) that let trusted third-party developers build applications and services around bank-held data–also reveals there is uncertainty about what is required.
In addition, most banks lack the necessary people and skills to become or remain compliant and many that have already implemented would outsource some or all of their open banking implementation if they could do things differently, according to Fiserv’s analysis.
As the Fiserv report notes, the goal of open banking is to create fintech ecosystems to give consumers more transparency and options for accessing account information and initiating payments.
The banks included in the analysis operate in European Union, the U.K. and Australia, and all the banks expressed some found many banks lack information on what they need to do in order to become compliant or continue operating in compliance.
‘Just Part of the Equation’
According to Fiserv, the majority of respondents from banks with $300 billion or more in assets reported that they had already implemented open banking projects. Many more smaller financial institutions are still in the process and can learn from the larger banks, Fiserv said.
In Australia, where the largest banks are required to adopt open banking by July 2019, banks plan to implement beginning in the first half of 2019 and pick up steam in the second half. No respondents from Australia have fully implemented open banking, and only 35% said they know if they are in scope of open banking regulations.
“Implementation numbers, though, are just part of the equation,” Fiserv reported. “The survey also dove deeper among banks that had implemented open banking, asking decision makers what they would do differently knowing what they know now.”
The Findings
Among the findings:
- Only 13% said they are happy with their implementation and would do nothing differently. Many others said they would have relied more on outsourcing, with 46% saying they would outsource third-party provider (TPP) life cycle management, and 23% saying they would outsource the complete open banking operation. On the flip side, 11% said they would have built and maintained everything in house.
- Among banks that have implemented open banking, 40% of respondents said major effort was required to become compliant with regulations, and another 41% said moderate effort was required.
- Overall, 31% of compliant banks say they have invested more than 1,000 hours, rising to 37% in the U.K. and 53% in France. In addition, 38% of compliant institutions expect it will take a major effort to remain compliant, with another 38% saying they expect moderate effort.
- Among institutions that have not yet implemented open banking, 58% estimate it will take more than 1,000 hours. In Australia, 80% estimate it will take more than 1,000 hours, with the remaining 20% unsure.
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As far as costs for open banking compliance,
39% estimate their bank will spend between £1 million and £10 million, with 29% expecting to spend more than £10 million.
For the full report, go here: https://www.fiserv.com/resources/fiserv-insights-banks-find-opportunities-challenges-move-open-banking.aspx