Now, more than ever, is the moment to seize the potential of open banking
The words “do one thing every day that scares you” are regularly yet mistakenly attributed to Eleanor Roosevelt, the first lady of the United States from 1933 to 1945. In reality, the line comes from a 1997 essay by Mary Schmich, a columnist for the Chicago Tribune. The quote was part of a broader reflection on worries about the future, something which has been front and centre as a result of the COVID-19 pandemic. In fact, despite being written over two decades ago, her thoughts could not be more relevant: “Don’t worry about the future. Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum. The real troubles in your life are apt to be things that never crossed your worried mind, the kind that blindside you at 4 p.m. on some idle Tuesday. Do one thing every day that scares you.”
As well as perfectly describing the historic moment that we’re going through (who would have worried three months ago about a global pandemic that would cause the worst crisis since the Second World Way?), Schmich’s words seem to have been taken as a guide for today’s financial institutions. Far from being scared of disruption, they’re increasingly embracing innovative projects and incorporating them in their “new normal”.
The open banking platform Tink has recently published data from a survey of 290 senior executives and decision-makers in financial institutions across 12 European countries. It’s a significant number of quality profiles, and the results show that a real shift has occurred. Almost two-thirds (61%) of financial institutions in Europe are feeling positive about open banking, which is up by 6 percentage points compared to the results from last year’s survey.
In addition, over half (52%) of those surveyed say they feel more positive about open banking than they did last year, and the number of decision-makers who claimed to feel more negative is a negligible 1%.
That said, this positive attitude doesn’t mean that organisations are going to suddenly benefit from the changes and innovations that come from open banking. In fact, according to the report’s authors, many institutions suffer from the lack of a clear strategy to realise the full benefits.
These claims haven’t just come out of thin air. According to the survey, almost half of those surveyed (46%) don’t believe that the benefits would be widely understood within their organisation, and a similar percentage (42%) don’t believe that their organisation has a clear strategy to realise those benefits.
In the opinion of Tink co-founder and CEO, Daniel Kjellén, there is a fragmented view in the industry. Some see open banking as a purely PSD2 compliance issue whilst others see it as a “long-term strategic play that involves a significant shift in their business model over time”. And both mentalities run the risk of “missing out on the open banking business boost”.
“For savvy and nimble institutions who look beyond compliance and can innovate fast, there is a huge opportunity for short-term, quick-win value creation through open banking. By behaving more like third party providers (TPPs) and making the most of APIs already on the market, institutions can reap the immediate benefits, creating improved products and services and enhancing customer experience”. The ones who take the headlines from this survey are the British financial institutions, who have shown themselves on average to be more receptive than their European “colleagues” (inverted commas owing to Brexit), to the extent that three quarters (74%) feel positive about open banking. According to Tink, this in large part due to the fact that the country has been “a pioneer” since the Competition and Markets Authority (CMA) issued an order in 2017 to open up the market and boost competition in financial services.
Spain takes second place in the rankings, where 69% of decision-makers feel more positive than a year ago. This is considerably higher than the European average (52%) and certainly way above countries like the Netherlands, where that level of enthusiasm remains at a meagre 30%.
Spain is also the stand-out leader when asked if they believed there was a clear strategy to benefit from the open banking surge. Nearly 8 of every 10 surveyed (79.3%) believed there was, against a European average of 57.6% and much more than the Finns and Danes, who sit at the bottom of the table with 40% each.
However, it’s not all good news for Spain since they lag behind Italy and Portugal when it comes to partnerships between financial institutions and fintech companies. Just 17.2% responded in the affirmative, compared with a European average of 22.4% and the two leading countries of Belgium (38.1%) and, once again, the United Kingdom (33.3%).
Therefore, for Spain, it’s time to incentivise these partnerships to truly release their potential, especially in the current situation. The country has the right attitude and plenty of enthusiasm, and this shouldn’t be impeded, not even by worries about the future, because worrying is as effective as trying to solve an algebra equation by chewing bubble gum.