Report outlines huge potential growth for open banking

14th October 2021

Open banking provider, Yolt Technology Services (YTS), launched its inaugural European Open Banking Outlook (EOBO) revealing huge growth potential for open banking, with 40% of banking customers across Europe’s biggest markets not currently using any open banking solution. YTS also sets out how this potential can be unlocked.

The EOBO, produced in partnership with the Centre for Economics and Business Research (CEBR) and experts from around Europe, tracks the progress of open banking across the continent’s six largest markets: Spain, the UK, Germany, France, Italy, and the Netherlands. YTS and CEBR commissioned Censuswide to survey nationally representative samples of more than 1,000 banking customers in each of these countries. Using four pillars:

  1. Openness – evaluates the degree to which relevant institutional and regulatory environments within each country support the open banking development.
  2. Availability – analyses how financial institutions have worked alongside third-party providers (TPPs) to enable customers to access open banking solution.
  3. Engagement – evaluates the extent to which bank customers in each country have made use of open banking.
  4. Impact – analyses the benefits that a range of open banking solutions have delivered to customers in each country, and the potential for wider use in the future.

Over half of all respondents in both the UK (50.95%) and Germany (50.2%) are not using financial products or services facilitated by open banking. Spain has the smallest percentage of banking customer respondents not using open banking at all (23.5%) and attains the highest score for the Engagement pillar (86 out of 100), which may be due to the efforts made by some of the country’s largest banks to create and promote comprehensive open banking propositions, maybe in part due to historic screen scraping activities. It is evident there is much that banking and other financial services providers can learn from counterparts in countries where higher levels of engagement are already visible.

The growth potential for open banking across different markets is clear with 33% of banking customer respondents across six markets supportive of using open banking products and services in the future and 30% demanding to see more financial products and services that make use of open banking become more mainstream.

The Impact findings suggests wider adoption can be improved by education around the benefits of open banking and the security measures used to protect data and users. Most respondents (67%) say the ability to view transactions or savings across multiple accounts is ‘very useful’, but other benefits of open banking including the ability to group transaction, set saving objectives and share information for credit access, are less known among banking customers.

When it comes to Openness, the UK has the highest overall score compared to other markets in Europe due to its supportive regulatory environment that stimulates innovation in banks and third-party providers (TPPs). The study reveals that only in the UK have policymakers and regulators extended the legal and regulatory foundation for open banking and created a framework based on cooperation. This includes the creation of the Open Banking Implementation Entity (OBIE) that plays an important role in encouraging collaboration across the banking industry to promote open banking, and a mandate from the Competition and Markets Authority (CMA) on API connectivity that ought to be implemented by banks.

The UK also scored high in Availability due in large part to its dominance of TPP registrations. There are currently at least 274 active TPPs registered in the six countries studied for the Outlook report and 63% of them (173) are registered in the UK. The availability pillar also assesses the number of account aggregation services linking to the top four banks in each country. The average number of connections between each of the UK’s top four banks and TPPs offering account segregation services is 12.5 compared to 8.0 in Spain and 2.5 in both Germany and Italy.

Notable results also include the stark difference between the Openness and Availability pillars and the Engagement and Impact pillars in the UK. While there is genuine support and a proactive regulatory environment for open banking to flourish, progress has been slowed by scepticism from banking customers around the benefits of open banking.

Nicolas Weng Kan, Chief Executive Officer at YTS said “Our findings reveal the need and growing appetite for open banking, but the variation in levels of understanding and adoption show that much more work needs to be done to help customers enjoy the full benefits of open banking-facilitated products and services. Recent months have showed the power and impact of digitalised services, and in the wider financial services sector these have largely emerged due to consumer demand. Our Impact pillar shows that the demand is also there for open banking, and it’s now up to the financial services industry to meet that demand.”

“There will be huge commercial rewards for banks and technology providers able to play an active role in this process – while those that fail to do so risk losing market share, profits and, eventually, any relevance to the needs of the growing numbers of bank customers who are embracing open banking.”

The study also considers the different practical, operational, and cultural circumstances present in each market as important contextual factors for assessing the development of open banking.

Open Banking League Table Score

Rank Country Openness Availability Engagement Impact Overall score
1 UK 81 82 32 33 64.5
2 Spain 48 62 86 71 63.1
3 France 37 51 64 47 47.9
4 Germany 40 43 28 55 43.8
5 Netherlands 49 34 55 38 40.8
6 Italy 44 28 35 56 39.7