The report was published on ‘The (Unmet) Potential of Open Banking’ and it outlines three main subjects: encouraging banks and financial institutions to expand Open Banking use cases through premium APIs, the development of new and efficient multi-party systems, as well as mandating banks to provide customers with a wider set of Open Banking use cases.
NatWest commissioned the economics and finance consultancy company Oxera to develop the report, aiming to offer an overview of the economic analysis and insights that will be further leveraged to improve the upcoming decision-making processes, during the next phase of Open Banking in the UK. Furthermore, Oxera identifies in the report the key economic challenges and difficulties that are affecting the wider adoption of Open Banking services and the development of new use cases.
NatWest identifies in the new publication multiple obstacles that are faced by banks and financial institutions, including a lack of commercial incentives to design or enhance APIs, as well as the absence of an alignment between Account Servicing Payment Service Providers (ASPSPs) on the benefits of Open Banking. Moreover, the report notes other challenges regarding the procedure of managing trade-offs, with the example in relation to security and convenience within the overall Open Banking ecosystem.
The first possible route detailed in the report is already under discussion, focusing on the manner in which mandate banks can offer a wider range of use cases by expanding the scope of Open Banking and providing the necessary data via APIs with no additional fees. The second route is also under discussion and it is set primarily on commercialised APIs and on encouraging financial institutions to expand and improve Open Banking use cases through the leverage of Premium APIs.
The additional third option was suggested by Oxera, and it highlights the importance of a multi-party system. By enabling multi-party systems to emerge services that already have a commercial incentive, they grow the Open Banking ecosystem through the procedure of designing new, flexible, and safe frameworks for industry collaborations.
Additionally, the report notes that there is a possibility for different routes to be optimal for different Open Banking use cases. As some use cases may benefit from hybrid approaches (mandating the development of an API, for example), the commercialisation process is made by the banks themselves or by a multi-system party.
The report offers banks and FIs an overview of the importance of Open Banking services and the way they can improve the overall customer choices and experiences.
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