Open Banking moves from compliance challenge to commercial opportunity

European financial institutions are spending between €50-€100 million on Open banking initiatives, with spend exceeding €100 million for nearly half (45%) of 290 financial institutions surveyed by Swedish account aggregator Tink.

Two-thirds of banks polled by Tink say Open Banking budgets have grown since last year, with annual spending rising by between 20%-29%. Just ten percent of institutions have slowed their investments in this area.

The data follows the publication of research by Finastra conducted among 774 banks worldwide which found that 86% of global banks are looking to use APIs to enable Open Banking capabilities in the next 12 months.

In the Tink poll, the opportunity to improve customer experience was the biggest driver for Open Banking spend — cited by 44% of the financial institutions surveyed. This was followed by IT modernisation (39%) and process optimisation (34%).

Yet barriers persist — with legacy IT seen as the top inhibitor of investment by one in three (33%) respondents. Meanwhile, 32% cited more important business priorities as a blocker and 31% believed regulatory restrictions stifled spending.

Nonetheless, financial institutions are optimistic about open banking ROI, with 50% projecting a payback period of less than four years and more than two-thirds (69%) expecting the benefits to outweigh the costs in less than five years. Just one percent of those surveyed felt there was no payback at all.

Revenue growth from new customers emerged as the most important success metric for open banking investments amongst 44% of respondents. This was followed by revenue growth from new products and services (39%) and the monetisation of data by offering developer services or APIs (37%).

Daniel Kjellén, co-founder and CEO, Tink, says: "The size of these investments prove that open banking has moved firmly from compliance challenge to commercial opportunity in the minds of financial institutions. Not only has it become integral to the digital transformation of financial institutions and been embedded across all parts of the organisation — it has also emerged as a key driver of revenue growth and an important differentiator when it comes to customer engagement and experience."