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Open banking: moving from curiosity to reality

The following is an excerpt from our ninth annual TCF survey report. Our survey encompasses the opinions of 235 senior bankers who attended the Temenos Community Forum in Barcelona 2016 and was carried out in conjunction with Capgemini.

The full TCF survey report can be viewed here.

For the second consecutive year we asked survey respondents about open banking. We broadly define open banking as the exploitation of APIs (Application Programming Interfaces) to:

  1. make data and functionality available to any user-interface (UI), including third-party UIs; and
  2. combine resources from other providers, both banking and non-banking, to enrich a bank's existing offering.

We initiated this question in 2015 as we believe it is essential for banks to open up their platforms to third parties to become marketplaces for both banking and non-banking services. We believe banks must do this in order to hold on to the distribution of financial products—in the face of the still formidable threat posed by internet platforms such as Google and Amazon, whose use of data to aggregate third-party products is already extremely sophisticated—and thereby remain relevant and profitable in the digital age. This is why Temenos has opened its own MarketPlace.

The 2016 survey indicates a step change in the banking industry's perception, understanding and willingness to embrace open banking. This year, 69% of respondents see open banking as much more of an opportunity than a threat compared to a 50/50 split a year ago. Furthermore, only 29% of bankers in this year's survey suggested they felt constrained by technology or costs, compared with 53% a year ago.

Perhaps most encouraging, is that open banking is now viewed as a priority by 51% of respondents, (up from just 30% a year ago) and 48% of bankers indicated they are ready to invest in an API platform (up from 35% a year ago)

The increased willingness to embrace and prioritize open banking has likely been driven by a combination of regulatory and market pressures. The EU's Payment Services Directive 2 (PSD2) regulation includes an Access to Accounts (XS2A) provision that will require banks, when requested by customers, to provide third parties—via APIs—with access to customers' data. Along with such regulations, banks are reacting to market pressures and realize that, for example, partnering with the FinTech community is essential to remain relevant and to improve profitability.

In fact, the partnership model is already being embraced by FS firms and as we saw from the recent World FinTech Report 2017 by Capgemini and LinkedIn in collaboration with Efma, more than three-fourths (76.7%) of financial services executives agreed that FinTechs provide partnership opportunities and around 60% are already seeking partnerships with FinTechs.

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