Open Banking is all about the customer being in control of their data and funds. It gives them the freedom and flexibility to decide when and with whom to share their valuable information. However, as with all vibrant and progressive ecosystems, speed, security, and ease of use will determine open banking’s future success along with the key issue of trust. Will the end user trust people to share data with them and trust their banks to still protect their data?
PSD2 Open Banking gives Payment Service Users (PSUs) the legal right to share their transactional account data with regulated third party providers (TPPs). For this to be possible, the 6,000+ Financial Institutions providing transactional payment accounts that can be accessed online have to put in place open banking APIs. These APIs give TPPs the access required to either make payments on an account holder’s behalf or view account data and funds, both of which require the account holder’s prior explicit consent. Access can only be denied if a TPP is believed to be unauthorised or fraudulent.
Open banking regulation has given rise to a new group of FinTechs who are seizing the opportunity to create innovative apps and products with the customer at the core of the offering. At the end of 2019, 240 TPPs from across the EEA and UK were regulated to provide open banking services. A year later, this figure had increased to 450 (excluding the thousands of credit institutions that are also able to act in the capacity of TPPs). The near doubling of newly regulated entities demonstrates user demand for the innovative products and services that these organisations are offering – it is now down to trust and security in the ecosystem, along with ease of use, to drive volumes.
