Financial Institutions across the UK are more accepting of and positive on the prospect of open banking in 2020 than they were in 2019. A recent survey shows that some of the concerns that weighed down the view of open banking just 12 months ago have been largely overcome and the concept is now increasingly being considered an opportunity for positive creation across the fintech industry.
In addition, UK financial firms are also more open to working with other financial technology firms as part of their open banking plans and strategies. This is good news for the UK’s broader plans to support the advancement of its own fintech industry and should prove a boost to the country’s economy too.
Revenue growth driving adoption
With more UK – and European – firms more positive on investing in open banking and many compliance worries are now in the past, one important question remains, why are more businesses interested in open banking? That question was among those in the survey from open banking platform Tink, and the results probably won’t come as too much of a surprise.
The most popular reason behind financial companies across Europe’s improved attitude towards open banking investment was the opportunity to use it to drive revenue growth. That highlights the commercial value now associated with open banking and also suggests competition will increase in the coming years.
Specifically, the survey showed the most important key performance indicators European financial firms are looking at in relation to their investment into open banking are:
• Revenue growth from new customers – 44.1%
• Revenue growth from new financial products or services – 39%
• Revenue growth from new APIs or developer services – 36.9%
• Market share growth – 30.7%
• Churn rate – 16.6%
With revenue advancement an important factor behind the intention to invest in open banking, it’s interesting to see the survey also showed that while the UK’s view of doing so has improved, firms in the country remain less optimistic on how quickly their investment will be returned.
On average, 50% of firms across Europe expect their open banking investment will be rapid in under four years, with 42.4% expecting that return to take more than four years. However, looking specifically at UK firms, some 46.7% expect to see enough return to repay the initial investment in under four years while 50% anticipate it to take more than four years.
Open banking investment plans
As more positive interest in open banking investment and adoption emerges throughout the UK and Europe as a whole, there are specific areas in which that investment will be directed to gain benefits from it.
The most popular areas in need of an update to get the most out of open banking are:
• Outdated IT infrastructure
• Re-evaluation of the most important business priorities
• Process optimisation
• Regulatory restrictions
• Lack of customer demand and awareness
• Lack of talent and skills to take advantage of open banking
This list of investment priorities highlights that while there are more optimism and acceptance, there are still many challenges facing financial institutions of all sizes in every country across Europe. That means that while the future for the use of open banking and the potential benefits are positive, there’s still some way to go before that potential can be realised, both for businesses and consumers.