“There is no logical reason why we cannot add a zero here and grow this to 260 million,” said Helen Child, OBE’s founder. “We have the talent and bedrock of innovation in place. It is an ambitious target, but working collectively as a community we will achieve it.

“The addressable market created by Open Banking will be worth $416 billion in the next three years, Accenture forecasted in 2021. Consumer awareness and adoption will rapidly accelerate the innovation of use cases beyond aggregation and payments. It will also enable the building of consumer-centric products and services on which banking becomes invisible. The best is yet to come,” she predicted.

The group argues that fast and accurate data-sharing enables banks and financial institutions to build products and services that are laser-focused on the needs of consumers and business customers and personalized by many sources of historical data. It also makes it possible to identify lending opportunities to previously “underfinanced” individuals or companies who have not have extensive credit records, by sharing data from sources that were not considered during traditional lending application journeys.

The report says that game-changers in 2022 will include variable recurring payments (VRP), which will be introduced in the UK at the end of July 2022, with NatWest the first to go to market. OBE expects this payments enhancement to enable lenders to control the customer experience and deliver unique propositions for consumers and SMEs alike.

Business changes

As evidenced by the standoff between Amazon and Visa at the start of the year, Open Banking-facilitated payments, where payments are made directly from bank accounts, are a growing threat to the dominance of cards within ecommerce. But the report also suggests the data related to Open Banking features will find its way into the optimization of processes in facilitating credit, loans, mortgages as well as in the provision of personalized offers.

In addition, the roll out of Open Banking payments will offer new ways for consumers to automatically manage their spending in a sustainable manner. Robert Courtneidge, a payments lawyer and industry expert, predicted in the report that: “This will help meet greener requirements for our environment by ensuring only the right amount of consumables are purchased as required, meaning the least possible fuel is used in deliveries. As smart cities emerge the ability to use Open Banking solutions will ensure the greatest efficiency as

we reduce emissions and track and pay for our carbon footprint. AI will always make better decisions than humans and will make sure our payments and spending are carried out in the most efficient manner.”

New opportunities

The report foresees the creation of a potentially vast new “open data” ecosystem characterized by platforms that take advantage of rich data to offer customers and businesses highly relevant, personalized products and services.

As part of this, OBE pinpoints embedded finance as a key emerging trend, in which financial services are built into apps that are built by non-financial organisations. Embedded finance is closely linked to the concept of the Super App, an all-in-one application offering banking services alongside other functionalities.

“Embedded finance is popular right now, creating opportunities for non-bank providers to offer account information and payment initiation within existing customer workflows,” Nick Reid, sales executive at Bankifi said. “Open Finance presents opportunities for banks too. There is no reason why a banking app can’t be the next ‘Super App’ from where consumers and businesses manage all their finances.”

Ryan Joyce, head of FinTech UK&I Salesforce, predicted that this technology will create a “Space Race” among leading players as they compete to launch products, build partnerships and iterate their propositions for the greatest impact. “Embedded finance is expected to generate $7 trillion of economic value by 2030, and promises to fuse financial services such as e-wallets, cards, lending and insurance products effortlessly within the customer journey of any company, within any industry,” he noted.

SME attractions

In addition, data can build bridges between lenders and businesses, enabling faster access to funds through the consent-driven sharing of up-to-date, relevant information. OBE says this will have a particular impact on the SME sector, arguing that when lenders have access to real-time data, they can make decisions at unprecedented speed and enable SMEs to access the funds they need to grow.

Data-powered personalisation allows banks to serve existing clients and onboard new customers by giving them fast access to products that meet their exact needs, rather than offering them unnecessary, superfluous or inappropriate services.

Potential barriers

OBE’s report identifies a number of barriers to wider adoption of Open Banking, including legacy technology constraints; the need for greater education and awareness of what is involved amongst the general public and businesses; and regulations. However, it expects strong growth over the next year.

“Banks are starting to realise that Open Banking is not simply a compliance issue, but instead a huge opportunity,” said John Broxis, managing director, Open Banking Europe, Open Banking Exchange. “To reap the rewards requires a complete business model shift.”

The OBE report highlights the shift towards an open, API economy, where finance is delivered by brands and not by banks, and calls for the creation of “even better mechanisms to foster the collaboration between different industry sectors to build together the foundations of the Open Finance APIs framework”, More information about Open Banking Excellence is here.