Open Banking Market Trends

Open Banking Market Driver 

Governmental Policies and Programs 

• Government regulations mandating the financial institution to share clients' information by APIs, such as the UK Open Banking plan, and the PSD2 of the EU, drive the global open banking market. Openness, increasing competition, and strengthened security push the banks and other fintech players to use the open banking solutions, meeting the obligations imposed by legislation and offering new-generation services to the clients. 

Demand for Digital Services by Consumers 

• The major drivers are the rising demands of customers for smooth, customized digital banking services. Consumers increasingly expect instantaneous, user-friendly financial services, including customized offers, budgeting tools, and rapid payments. Open banking is a good option for banks in an effort to meet changing consumer demands since it allows them to provide these services by safely exchanging data with third-party sources. 

Open Banking Market Restraints  

Data Security and Privacy Issues 

• Data security and privacy are the most important challenges for the open banking industry. The risk of data breaches and unauthorized access becomes higher with banks, third parties, and fintech companies accessing sensitive financial information. If effective safeguards are not in place, then these security risks may compromise the confidence of the consumers and therefore the widespread adoption of open banking alternatives will be impossible 

Complex Integration and Legacy Systems 

• It can be complex and costly for financial institutions to implement open banking solutions on older systems. Most banks are running on antiquated technology, making it challenging for them to deploy the modern, API-based system. Some of the smaller banks and credit unions may be deterred from applying open banking due to its complexity and high cost associated with system upgrades to continue their expansion in the market.