Open Banking PTBR

Are Regulations a Driver for Open Banking? Mixed messages from banks suggest that while some banks are complying with the rule of the law, those showing open banking leadership are being driven by a more far-reaching view of the market horizon. The UK and Europe's open banking regulations are now beginning to have a ripple effect internationally, with other government jurisdictions considering how to introduce open banking compliance frameworks. While the regulatory environment has been established in the UK and Europe, there is not yet an inspired zest amongst banks to make open APIs available. In the UK, progress seems very much focused on meeting the rule of the law at its least impactful. The UK's Competition and Markets Authority (CMA) requires banks to open up product data via API, and traditional banks have conformed to this but are doing little more (see page 13 for a breakdown of open API product categories in UK and Europe). This is in sharp contrast to challenger banks, such as Starling and Monzo. While Monzo has not prioritized a production-capable API for third party access as yet, citing regulatory constraints, Starling has moved already towards creating a marketplace for third party products built off their API. In Europe, some leadership banks are using the PSD2 regulations to establish relationships with fintech application developers. Banks like BBVA have been spearheading open APIs for several years now, with a suite of APIs available for integration into new products, Erste Bank, a Baltic banking group, started by opening APIs for their Czech Republic bank and are now replicating that model across other national banks in the consortium. While they see 80% of API usage coming from corporate customers who are integrating APIs internally to their systems, they do also have some third party innovators creating new products, such as Upvest, a real estate investment platform built using Erste's APIs. In Scandinavian countries, several players had already been considering a move to APIs. Areas like Norway have had regulatory environments and agreed standardized approaches for sharing data and common payments infrastructure, so now banks in those nations are building APIs to adhere to the PSD2 regulations. Banking executive interview respondents recognized that open APIs will also bring new types of competition, so while they do not see as much of a need for open APIs for payments facilitation as other countries may have, given they already have standardized payments infrastructure, they do want to move forward with open APIs in order to ensure continued opportunities to remain at the forefront in digital banking, where banks have managed to hold onto their lead in customer relationships. 18 State of the Market report 2018

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