By Francesco Simoneschi, CEO and Co-Founder of TrueLayer makes his Open Banking predictions for the next 12 months
Christmas – a time to buy loved ones presents, travel to see family and, of course, consume an inordinate amount of food and drinks. All of which takes money. This year, more people than ever before will be using Payment Initiation to make their online purchases. They will be using AI-driven money management apps to keep their spending in check, account aggregation tools to monitor and move money around, and, perhaps, instantly getting personalised quotes to insure those big purchases. OK – perhaps Open Banking is not the most festive topic. However, December is the perfect month to consider how Open Banking has progressed and make some informed predictions on how it will evolve next year.
2019 was the year Open Banking started to be taken seriously by businesses and investors. Major banks and credit card providers forged networks and partnerships with Open Banking-based startups. Investment in Open Banking is estimated by Finch Capital to top €480 million in 2019 – up from around €50 million in 2018. Granted, it’s hard to get exact figures due to the way some fintech companies are classified, however, the trend is up, and up in a big way. Scores of new Open Banking-based startups have launched in the UK alone. Numerous companies are now using data enabled by Open Banking to offer new services and products.
In short, the fundamentals of Open Banking are now incredibly strong. So what will 2020 bring? The naysayers may be quick to point out that the average consumer has never heard of Open Banking. This will change in the next twelve months. Open Banking is going to reach mainstream adoption in the UK. Building on the strong foundations laid this year, there’ll be a veritable explosion of new use cases. Investment, insurance, KYC, renting, money management, loans and FX will be hit by a wave of new products. There may even emerge the start of the financial ‘super app’. A platform that will pull together all the current best Open Banking use cases into one solution. Some of the most exciting progress is likely to be made where artificial intelligence, data science and Open Banking meet.
Similarly, Payment Initiation’s popularity is likely to grow significantly in 2020. Facilitated by PSD2, Payment Initiation is cheaper, faster and more secure for businesses and consumers than nearly every other payment method. These benefits are impossible to ignore. Curiously, the UK lags behind many of its major European counterparts in relation to adoption. This gap will close as it becomes more ubiquitous and established as a way of paying and transmitting money. In turn, European countries will begin to play catch up with the UK in relation to the adoption of Open Banking based financial apps. This will be driven by the overdue end of screen scraping and other non-secure techniques such as the reverse engineering of mobile apps.
Beyond Europe, Open Banking will break into new, major markets. Australia will be the country to watch. The Consumer Data Right legislation will come into full force in February – mandating essentially the same API-based system the UK adopted in 2017. I expect the market to develop quickly due to lessons learnt from Europe. It will be intriguing to see the use cases that begin to emerge in the second half of 2020.
The growth of bank APIs and Open Banking style regulatory regimes will also continue to develop in major economies such as the US, Canada, Japan and Brazil. There is also a similarly progressive attitude forming in Hong Kong and Singapore. A lot of the political momentum behind these changes will be driven by these countries seeing the success of Open Banking in Europe and, in particular, the UK’s booming fintech industry.
Open Banking may never be a topic of discussion around the Christmas dinner table, indeed, many consumers may never even learn its name. However, by the end of 2020 it will be the dominant force in global fintech. It will have profoundly changed how many people experience and use money.