5 Takeaways From the Open Banking World Congress 2022

For those countries in which the private sector has taken the lead in open banking, regulators will, at some point, have to step in. A market-driven approach can be a good starting point and can pave the way to great solutions but, for open finance to unlock its full potential, robust regulatory frameworks are needed. For instance, the UK wouldn’t have got to where they are without industry collaboration. And since collaboration is not in the traditional banking sector’s culture, it would have been complicated to come together without the guidance of a regulatory authority.

Industry-wide technical standards are a must for open finance to flourish in a given geographical zone. Regulators thinking about implementing new frameworks should provide clear technical standards instead of just releasing guidelines. EU’s PSD2 is the best example of a framework that only provides specifications and we are now seeing the limitations of such an approach. If you are building your country’s open banking ecosystem, be sure to learn from the other’s mistakes. Providing technical standards might seem like something that will discourage the private sector and stifle innovation, but they will eventually end up thanking you for it.

Not all markets are equal in terms of open banking but every single one of them still has something to improve for open finance to become a trusted reality. There are four key areas in the development of an open finance framework : fast payments, digital identity, technical standards and customer data rights. No market has successfully developed all four. The most advanced one is probably India with its creative approach. Effectively, the data aggregator is the most regulated entity in their framework and it enables the communication between banks and Fintechs. Banks don’t know what Fintechs get the data and Fintechs can only get the data indirectly through an intermediary.

Variable Recurring Payment is the new trending topic in open banking. The Competition and Markets Authority has asked the nine largest banks in the UK to provide VRPs between two accounts that belong to the same individual. Although this is still quite limited, it certainly marks the beginning of a trend in the industry. We are now seeing the first recurring payments APIs go live.

Besides current trending topics, there are also some emerging themes like ESG and blockchain. Indeed, an increasing number of solution providers propose services around ESG scoring and there is a growing importance given to the information about the providers in the payments world. Moreover, bridging fiat and crypto digital ecosystems seems to be something financial institutions are interested in. The number of projects around this use case is rapidly taking off and banks are eager to find technical solutions that could help them do so.