THE VAST majority (84 per cent) of the UK’s financial companies are investing in Open Banking products and services, with almost half (44 per cent) admitting that they are mulling new product launches to improve the Open Banking experience for their customers.
According to new research from law firm TLT, 77 per cent of financial services firms believe that Open Banking is one of the most radical changes in recent history for financial services.
However, 53 per cent of respondents to the TLT survey said that the industry has struggled to adapt to the new regulations, with almost two thirds (62 per cent) saying that they do not have a comprehensive strategy in place to invest in Open Banking.
“Our research reveals the true scale of disruption that financial services companies are grappling with, alongside the opportunities that these far-reaching changes have created – provided that companies can keep up with the pace of change,” said David Gardner, partner in the financial services team at TLT.
“It is encouraging to see that the vast majority of respondents hold Open Banking up as a positive initiative and – despite the challenges with defining a clear Open Banking strategy – the industry is not standing still.
“Innovation is happening all the time as more participants define their strategy and find new ways to collaborate, which is creating a huge sense of anticipation in the market. The race is on for every participant to identify their position and launch a “killer app” or product to capture that opportunity. Open Banking will open up the market to new participants and continue to drive disruption for all.
“This could result in a more polarised market, split between niche offerings and financial services platforms, and between those who embrace agile transformation and those that are more reactive and slower to adapt.”
TLT interviewed more than 130 decision makers at financial services firms across the country, to get a better sense of the industry’s attitude towards Open Banking. It found that banks were particularly worried about ‘big tech’ companies such as Google, Amazon, Facebook and Apple, as well as challenger banks and fintech firms.
Two thirds of those interviewed said that they believe the market will become more consolidated as larger banks and corporates acquire fintech businesses and smaller banks in order to access their technology.
However, nearly three quarters (72 per cent) said that Open Banking has been a positive step forward for the financial services industry.
“There are considerable challenges for existing players and new entrants – from complying with regulatory technical standards to identifying market opportunities and potential partnerships and making sure that customer data is adequately protected,” added Gardner.
“Customer confidence and trust must be a major area of focus in order to realise the potential benefits that Open Banking can deliver. Would-be Open Banking champions need to consider their position, their partners and their strategy carefully, but make sure they can act and react quickly enough to take full advantage, before someone else does.”
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