What are the emerging trends in the Open Banking market?

By Puja Sharma

The global Open Banking market is expected to grow from $11.79b in 2020 to $15.13b in 2021 at a compound annual growth rate (CAGR) of 28.4%. The change in growth trend is mainly due to the companies stabilizing their output after catering to the demand that grew exponentially during the COVID-19 pandemic in 2020. The market is expected to reach $37.77b in 2025 at a CAGR of 25.7%.

In the Open Banking market, entities (organizations, sole traders, and partnerships) offer their customers open banking services, enabling banks, third parties, and technology providers to exchange data securely and easily. Banks and non-bank financial institutions (NBFCs) implement open banking by granting access to transactions, banking information, and other data to third parties through application programming interfaces (APIs). These APIs make it easier for consumers to compare current accounts and other banking services and provide secure ways to share financial information between two parties.

The North American market for Open Banking was the largest in 2020. The Asia Pacific is expected to grow at the fastest rate during the forecast period. There are six regions covered in this report: Asia-Pacific, Western Europe, Eastern Europe, North America, South America, the Middle East, and Africa.

Rising trends

The surge in usage of online platforms for making payments is contributing to the growth of the open banking market. The digital payment system is rapidly expanding with developing payment methods, increased e-commerce use, improved broadband access, and the advent of new technologies.

Platforms like Paytm, Google Pay, and phone pay use payment gateway APIs for managing recurring billing and these APIs are often used in open banking as well. Google Pay, a digital wallet platform based in the US, crossed 1 billion transactions in August 2021. Furthermore, PhonePe, a digital payments network, reached yet another milestone by processing 1.5 billion payments through the unified payments interface (UPI) in July 2021. As a result, online payment platforms are expected to contribute greatly to the growth of the open banking market in the coming years.

The Open Banking market is seeing an increase in big data analytics. Big data analytics collects, processes, and analyzes structured, and unstructured data. The major use of big data analytics is to get business insights into the data. In the open banking market, big data analytics is used to personalize the services for improving the customer experience. For instance, in 2020, HSBC Bank plc, a UK-based investment banking company increased its investment in the use of artificial intelligence (AI) and big data analytics techniques to manage financial crime risk.

The global open banking market is highly competitive and the prominent players in the market have adopted various strategies to garner maximum market share. These include collaboration, product launch, partnership, and acquisition.

In June 2021, Visa Inc., a US-based financial services company acquired Tink for $2.15b. The acquisition is expected to accelerate European open banking adoption by providing a secure and dependable platform for innovation. As a result, customers will have more control over their financial experiences, including financial objectives, managing their funds, and financial data. Tink is a Sweden-based open banking company that helps banks, FinTechs, and start-ups across Europe develop database financial services.