The aim of open banking is to spur innovation in the financial services industry and provide consumers with a better deal. However, research by the open banking platform Tink finds that many European financial institutions have concerns over the potential impact.

The Swedish group’s report, based on a survey of 269 senior decision makers in financial institutions across Europe, shows that 39% regard open banking regulation as the biggest current threat to their business model, while 56% fear that consumer loyalty towards banks will be significantly reduced as a result of open banking.

At the same time, financial institutions appear to be increasingly aware of the importance of innovating to remain competitive in the business environment. As a result, despite short-term concerns the data reveals cautious optimism in the long term with 55% of European financial institutions positive about open banking, while 45% regard it as an opportunity for their business. 

“Technology has torn down the barriers to data and created an opportunity for everyone – incumbent banks, fintech challengers and developers – to build great products,” said Daniel Kjellén, co-founder and CEO of Tink. “The Payment Services Directive [PSD2] and open banking regulation are acting as a rubber stamp for this movement.

“Understandably, this is causing disruption and uncertainty in the banking industry as financial institutions have had to come to terms with big changes over a short period of time. And while a majority of are starting to recognise the long-term benefits of open banking, there are still concerns and challenges that must be overcome in the race to meet the regulatory deadline.”

Approaching deadline

Tink also reports that with the September 14 final deadline to comply with the PSD2 regulatory technical standard (RTS) fast approaching, significant challenges still remain. The trio of regulatory compliance, access to tech and talent (all 91%) top the list of barriers for European financial institutions to embracing the open banking opportunity.

The other factors seen as moderate or major challenges associated with open banking include:

• Finding and collaborating with new partners in the fintech space (90%)
• Technology, e.g. modernising IT systems (88%)
• Overcoming resistance from internal stakeholders (87%)
• Commercialising open banking opportunities (87%)

For the majority, partnerships are now seen as an important route to overcoming the challenges associated with open banking. Almost half (49%) see fintech partnerships as helping them deliver a better customer experience. Other benefits include access to the latest technology (42%); quicker time to market (40%); and access to talent and knowledge (38%).

As a result, 23% of financial institutions surveyed say that they are already in a partnership with a fintech, while 51% are planning a partnership in the next 12 months.

Earlier this month, Tink announced that Natwest would be the first UK partner for its open banking platform, joining other European names such as BNP Paribas, ABN AMRO, Nordea and Swedish online payments innovator Klarna.