Open Banking has quickly leapfrogged from a mere concept some two years ago, to almost an inevitable reality today. In 2020, we expect a further acceleration of its adoption spurred by aggressive moves and consolidation by the dominant players in the banking industry.
From an inevitable reality just about 6 months ago, Open Banking is now facing a difficult test. And arguably, one of its greatest disrupters, the COVID-19.
Some two years ago, what started with PSD2 regulation in Europe, is steadily being adopted in various regions around the world such as Australia, several parts of Asia, Latin America and many other regions.
PSD2 or the second Payment Services Directive, is designed by the countries of the European Union which aims to revolutionise the payments industry. Its goal is to break down the bank’s monopoly of their user’s data and allow third-party merchants to retrieve your account data – with your permission – for the purposes of providing better and more efficient customer experience.
From an inevitable reality just about 6 months ago, Open Banking is now facing a difficult test. And arguably, one of its greatest disrupters, the COVID-19.
But the current situation is proving to be a great hindrance for its expedited worldwide adoption. For example, in Australia, the Open Banking timeline is once again being postponed.
“While the deadline for non-major lenders to make their product data available under the Consumer Data Right has been set for 1 July 2020, the ACCC has granted a three-month exemption due to the COVID-19 pandemic,” according to a report by Australia Broker.
ACCC or Australian Competition and Consumer Commission is Australia’s competition regulator and national consumer law champion.
According to the same report, “the implementation of open banking has already been postponed once before, to make time for additional testing to ensure security and privacy protections were operating effectively.”
It is foreseeable that what’s happening in Australia is not unique and that similar measures are also being done in various countries and regions facing the same unprecedented crisis brought about by the pandemic.
Open Banking must stay the course
The old rules of banking don’t apply anymore. Regardless of the amount of challenges being faced by the industry, the open banking initiative must stay the course. As digital banking grows and fintechs continue to introduce innovation to the market at a breakneck speed, embracing this brave new world of open banking will prove to be a long-term win, even for traditional banks.
According to a survey by Accenture, 90% of bankers believe open banking will boost organic growth by up to 10%. That does not mean though that it will be a smooth ride. Indicators coming out of European banks reveal that resistance among incumbent banks will be great and that change might come slower than what’s ideal or is required. The onus will be on those banks who can see the future before it happens and are bold enough to take action, now. As the current situation unfolds, this could actually be a golden opportunity to work together to achieve a common, audacious goal.
