Voice of the Industry

Open Banking is taking off! But where is it heading and who is in the lead?

Monday 14 October 2019 09:37 CET | Editor: Melisande Mual | Voice of the industry

Oliver Dlugosch, ndgit: The ultimate goal for Open Banking is the formation of‘ecosystems’ that offer heavily-tailored and richly customised services, seamlessly delivered from multiple players and sources

Many countries have embarked on their Open Banking journey. As global momentum gathers pace, Oliver Dlugosch, CEO of ndgit, takes a deep dive into the international markets, providing a measured look at where developments are heading and which regions are out in front.

The race to open up banks to third parties is being driven internationally by four key drivers: changing customer behaviour, increasing networking among banks, the rise of ecosystems, and the emergence of new supporting API technologies.

More than 50 countries now have some form of Open APIs in place, touching more than 10,000 banks. From what we’ve seen in our research, effects are even bigger: 87% of all countries now have some form of Open API activity, which leads us to the conclusion that Open Banking truly is a global phenomenon now!


What’s fuelling progress?

In some markets, like the EU, regulators are providing the conditions to accelerate migration. In others, the absence of a legal framework means market participants have to set their own voluntary standards. In both cases, new Open Banking APIs are the catalyst for all banks involved in implementing API banking.

That said, the presence of regulation stands out as having the most impact on national markets by mandating banks to offer Open APIs. Currently, legal requirements are being developed in seven major markets, including the EU, and more than 10 others are working on market standards for Open Banking.

Using Open APIs to measure success

What’s much more difficult is pinpointing how markets relate to each other, which countries are in the lead, which ones are lagging behind, and where do they fit within the overall global Open Banking revolution.

To discover more, ndgit recently carried out a systematic country analysis to try to quantify Open Banking aspirations across the world.

Countries were ranked using four factors: the spread of Open APIs, regulatory requirements, standardisation initiatives, and the presence of a central TPP regulatory body. From this, we were able to identify five key ‘types’ based on their progress to date:

Pioneers, with heavily regulated Open Banking environments;

Followers, in the process of implementing regulation;

Converts, unregulated but with established Open APIs and standards;

Risers, unregulated but with evolving Open APIs and standards;

Beginners, with little national progress on regulation or standards.

Unsurprisingly, the UK, Australia, and the EU came out as Pioneers, the clear ‘front runners’ of Open Banking worldwide. Japan, Hong Kong, South Korea, Bahrain, and Brazil are chasing closely behind as Followers, while among the mid-field Converts are Mexico, Singapore, Malaysia, Canada, and Thailand. Risers, who have all set-out on the path but have some way to go, are Switzerland, India, Indonesia, and China.

At the earliest stage of development are Beginners, including the US, New Zealand, Chile, Nigeria, Kenya, and Rwanda. From the outside, some of these markets may seem well established, technically advanced and highly competitive. However, the absence of any real momentum in terms of Open Banking regulatory frameworks or common standards means they are not ready to begin their journey – yet! But it is only a matter of time.

Fast-tracking for advantage

It’s clear that globally there is still much work to be done. Legal regulations exist in the EU, UK, Australia, Bahrain, and Hong Kong and are in progress in another half a dozen other countries. However, that leaves a lot of markets still yet to take the plunge. In addition, there are currently just four countries with central regulatory bodies for TPPs.

As more markets board the Open Banking bandwagon, and competition with non-bank players intensifies, this situation may well change.

In the battle for the end customer, it’s clear that banks must be able to face-off future ‘banking’ functions powered by the platforms of large technology companies (like Google, Amazon, Facebook, and Apple), which have both customer access and experience with large-scale, customer-centred processes on their side. The need for international competitive advantage could see many countries fast-track development to leap to the front of the pack.

So, where’s it all heading?

The ultimate goal for Open Banking has to be the formation of ‘ecosystems’ that offer heavily-tailored and richly customised services, seamlessly delivered from multiple players and sources. Open Banking not only helps banks on this journey, it also allows them to remain at the heart of these ecosystems. Moreover, open APIs provide the technological backbone that allows them to network with fintechs – via affiliated services from a single dashboard (like apps in a smartphone App Store).

There’s no single model or solution to achieving this, banks can either build their own ecosystems or link up with existing ones. Either way, success depends on convenient connection to partners and value chains via banking APIs.

Open Banking isn’t a new concept, but what started out as isolated local initiatives now represent a growing global movement that is being embraced on a strategic as well as a technical level to unlock a new world of rich, interconnected digital services. Those out in front have already embraced open platforms, regulation, and standards to help them achieve this. The question is how soon the others will catch up!

This article is based on findings from ndgit’s latest white paper: Open Banking Worldwide. For deeper insight download a copy here.

The editorial was first published in the Open Banking Report 2019, which clarifies the role of key key-players in a post-September 14th world and assesses how the landscape has shifted within Europe and beyond

About Oliver Dlugosch

vspace=4Oliver Dlugosch is CEO and co-founder of the startup ndgit in Munich, who’s vision is to change everyday’s banking by building digital ecosystems, connecting banks and fintechs with an outstanding Open Banking platform. Prior to that, he spent more than 10 years in the management boards of Crealogix, Fincon, and Raysono, focused on banking technology and digital banking.

About ndgit

vspace=4ndgit stands for Next Digital Finance. The company provides a proven API platform for banking and insurance. Connecting banks and fintechs with digital ecosystems, its technology opens up banks to digital partners with Open Banking APIs and PSD2 solutions. The ndgit fintech platform forms a technological backbone for new applications and IT landscapes in banking and insurance.

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Keywords: Oliver Dlugosch, ndgit, Open Banking, API, innovation, fintech, PSD2, banking, digital banking
Countries: World