Open Banking PTBR

Reflecting the PSD2 regulatory environment, 2018 has seen growth in the number of payments (26% of APIs, the same as in 2017) and account information APIs (25% of APIs, up from 17.5% in 2017), with the majority of open banking APIs falling into one of these two categories. Payments, in particular, is an important baseline product category for open banking APIs, as payments APIs are needed to enable other types of financial services. For example, loans provision and repayments require payments capabilities. Because of the unique regulatory environment in the UK where banking products need to be made available by API, 9% of APIs being created by banks fall into this category. This is also a "low hanging fruit" API, with minimal security concerns and ideal for teams wanting to experiment with building APIs. The challenge is that this type of API has limited use cases that can demonstrate the value of opening APIs. In other cases, banks are choosing identity and KYC processes (12% of APIs), another key capability that must often be first carried out via API before other types of transactions. Surprisingly, foreign exchange (FX) rates have reduced from being about 6% of all API products in 2017, to representing 3% of all APIs in 2018. In interviews with banking executives, FX rates were often seen as a good contender for opening APIs, not so much because of innovation with external partners, but because of internal efficiencies that could be created, as often banks with multiple groups and branches would need to regularly upload FX spreadsheet tables which slowed down manual processes, whereas an API could enable real-time, automated data to be used with less risk of error. "We are looking into APIs that can accomplish cost reduction," said one banking executive. "For example, we provide cash exchange rates to hotels and airports. Every morning, we send an email of cash rates for the day. APIs could do a lot of cost reduction on that side. There is a lot of manual work that is repeatedly done on both sides, between the bank and the hotels and airports, and building an API would remove most of those inefficiencies." Credit cards (7%) and credit scoring (5.3%) are seeing interest from open banking platforms, where activity in Asia-Pacific countries is strongest. The majority of survey respondents and banking executives, while feeling that open banking is still very much at the nascent stage with many of the necessary organizational components still needing to be put in place alongside the architectural reorientation, did indicate that they believe their organization will continue to release open APIs in the next three years (89%), with 84% indicating they are currently doing proof of concept prototypes of new open API products. Expectations on new open APIs in next 3 years (N=64) 1.6% Reduce open APIs 89.1% Increase open APIs Stay about the same 6.3% Don't know 3.1% No 16.1% Doing proof of concepts for new open API products? (N=62) 83.9% Yes 29 pROducT pRIORITIzaTIOn

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