Appetite for open finance grows with evolving Open banking

By Puja Sharma

Finastra global survey shows the evolution of Open Banking and growing appetite for open finance

Almost half of the financial institutions (48%) regard open finance as a ‘must have’ (up from 38% in 2021); 85% agree it’s making financial services more collaborative. Around 83% of institutions concur that Banking as a Service and embedded finance are expected by customers; 35% have improved or deployed BaaS in the past year

Finastra research reveals that Open Banking is now universally and unequivocally regarded as a key part of a bank’s landscape, with 99% of respondents considering it either a ‘must have’ or ‘important’, up from 94% last year. The proportion of global financial institutions that consider it a ‘must have’ has risen to 61%, a notable increase from 2021 (51%).

The ‘Financial Services: State of the Nation Survey 2022’ finds that views on open finance are also maturing with some 94% of financial institutions regarding it as either a ‘must have’ or ‘important’ in the context of data sharing (up from 91% in 2021). Almost half (48%) of respondents now consider open finance a ‘must have’, a notable rise from last year (38%). The increase is significant across all territories but particularly pronounced in the UAE (up from 50% in 2021 to 71% this year), the UK (up from 33% to 47%), and the US (up from 45% to 56%). This suggests that the sector globally is actively investigating products and services that would benefit from an ecosystem model.

Some 85% of professionals agree that open finance is already making the industry more collaborative and is having a positive impact on the industry.

The research was conducted amongst 758 professionals at financial institutions and banks from August to September 2022 across France, Germany, Hong Kong, Singapore, the UAE, the, UK, and the US. It explores the Open Banking and Finance landscape, the technology and initiatives set to make an impact in financial services over the next year, and the growing importance of ESG.

“Finastra has always championed open finance as the key to unlocking the potential of people, businesses, and communities everywhere,” said Simon Paris, Chief Executive Officer at Finastra. “Over the years that we have conducted this survey, we have seen open finance grow from an emerging idea to a clear priority for institutions across the world, enabling, as it does, business model shifts such as embedded banking, as well as financial inclusion and equality.”

Key Insights:

• Banking as a Service (BaaS) and Embedded Finance have become an industry norm – 83% of institutions agree that BaaS and embedded finances are already expected/demanded by customers. More than a third (35%) of institutions surveyed have improved or deployed BaaS in the past year. A fraction less (33%) have deployed embedded finance.
• Drivers for technological adoption remain consistent with previous years
• Growing our business (48%), meeting current and future customer expectations (45%), staying ahead of our competitors (42%), and cost-cutting (42%) are all key drivers
• Interestingly, half of the other financial institutions (50%) now have all or most of their software stack on cloud-based solutions, with a further third (32%) splitting equally between cloud and on-premises solutions.
• Global financial institutions are being prudent with their technology investments – with 82% noting constraints compared to 2021. Despite the current economic uncertainty and wider cost pressures, the majority (74%) forecast that they will have resumed their full investments by the end of H1 2023.
• Support for ESG is widespread – Almost 9 in 10 organizations (86%) agree that it’s important for the financial services and banking sector to support environmental, social, and governance initiatives. Linked to this, 82% of respondents agree that green lending presents an opportunity for growth and revenue generation, with the UAE (94%) and Singapore (88%) showing the strongest appetite.