Open Banking Adoption: 1578 banking platforms and 5564 APIs worldwide

Across the world, the use of open banking services is steadily increasing, embraced by a growing number of banks and fintech companies to offer innovative financial products and tap into new market segments.

A new report from Platformable, a Barcelona-based start-up that builds data products and digital tools, looks at the latest developments in the global open banking/open finance scene, and dives into emerging trends and key factors for the sector’s growth.

According to the research, 2022 has so far been a fruitful year for the open banking industry. Among the key trends observed this year, the report notes that in Q2 2022, the number of open banking platforms and APIs continued to increase, indicating growing adoption across stakeholders. Banks, meanwhile, pursued new business models and opportunities, including banking-as-a-service (BaaS) offerings and partnership models, and fintech companies continued to leverage banking APIs to innovate and launch new products.

1,578 open banking platforms and 5,564 APIs worldwide

At the end of Q2 2022, Platformable identified 1,578 banking platforms that made APIs available, representing 8% annual growth. Together, these banking platforms made 5,564 open banking API products available to third parties, up from 4,831 in Q1 2022.

Europe remained at the forefront, accounting for 73.5% of the world’s open banking platforms (1,160) and 45.6% of available open APIs (2,537) at the end of Q2 2022.

Although Europe led in terms of absolute numbers, platforms and products, Asia-Pacific (APAC) saw the strongest platform growth, with open banking platforms growing 44% in Q2 2022 year-on-year (YoY) to 203, an increase that was largely coming from Australia, Hong Kong, Indonesia and the Philippines, the research found.

Global Open Banking API Platforms and Their API Products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Open banking regulations in advance

As of Q2 2022, 80 countries had open banking regulations in place, while 75 were either close to or in the implementation stages of open banking regulations.

Europe and the UK have made progress towards an open financial framework. In Latin America, countries including Brazil, Argentina and Chile continued to lay out their national frameworks, providing greater clarity and rules for interoperability, mandated account aggregation capabilities and the introduction of fintech laws.

In the Middle East and Africa, Bahrain issued changes to its open banking rulebook and Nigeria published open banking draft guidelines. And in APAC, India unveiled plans to share personal income data and open e-government tools to global stakeholders.

Current Progress of Open Banking Regulations Worldwide Q2 2022, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

API product diversification

In Q2 2022, API products rose 15% YoY, with the largest growth in Latin America (LatAm) (56%), North America (35%), UK (27%) and Asia Pacific (24%) ).

While most open banking APIs provided by financial institutions remain mandated payments, accounts and banking products, other non-mandated APIs are growing rapidly, including know-your-customer (KYC) and identity, credit services and commerce, the research found, which indicating that banks are keen to expand their API offerings and embrace the trend.

Growth of API products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Banks are exploring new business models

Banks are actively exploring new business models using APIs, including partnership programs, paid premium APIs, startup funding and mentoring programs, and BaaS offerings, the research found. Some, such as the UK’s Starling Bank, Singapore’s DBS Bank and Brazil’s Banco do Brasil (BB), have gone a step further, embracing an open ecosystem approach and offering marketplaces that include third-party apps and providers.

BB’s API program, for example, is divided into two streams: BB’s open ecosystem and the Open Finance Brasil API offering that showcases some third-party providers, and the bank’s own API portfolio of over 20 APIs under partnership and BaaS models.

Deutsche Bank is betting heavily on built-in finance, offering a wide range of APIs and built-in finance options. Deutsche Bank’s developer portal contains APIs for all banking sectors, as well as sandbox and production environments.

Open banking boosts fintech innovation

By looking beyond banks’ platforms and APIs, the research found that open banking helps foster fintech innovation more broadly, and helps develop domestic fintech ecosystems.

In the US, 82% of API-enabled fintech companies are homegrown, compared to 70% in the UK (the lowest), suggesting that open banking is enabling larger homegrown fintech to emerge.

Platformable identified 2,854 API-enabled fintech products at the end of Q2 2022, and while payment solutions remain the dominant category, representing about a third of all API-enabled fintech solutions, other categories and subcategories are also emerging , including account keeping and budgeting apps, digital and open banking solutions, private administration solutions, data, analytics and algorithms, as well as consumer loans and credit services.

Top 10 fintechs using APIs by subcategory, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

SMEs and individuals remain top target markets

The research found that fintech solutions using banking APIs mainly target SMEs and individuals, accounting for 59% and 40% of all open banking fintech products globally, and are fairly generic.

This means that there is a large opportunity gap to offer products that meet specific customer segment needs, including immigrant workers, foreigners and freelancers, the report says.

However, such products have begun to emerge, it notes, citing examples such as American Viva First, a digital banking app for the Latino community in the United States; Smile, a credit scoring platform for the Philippine workforce; and Yonder, a UK provider of loyalty cards for expats.

Primary target market for fintech products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

An opportunity to improve financial inclusion

New technologies, including open banking and open finance, drive down the cost of doing business and give a wider range of users access to financial services, introducing opportunities to help improve financial inclusion.

In Brazil, open banking is expected to bring 4.6 million more people into the formal credit market for the first time, expand access to attractive loan rates, and inject BRL 760 billion (US$141 billion) into the economy, according to a recent study by Serasa Experian, a local credit investigation company.

Platformable estimates that 54% of existing fintech products built on open banking/open finance APIs can be used to address financial inclusion, highlighting the potential of open banking to drive social and economic development.

Featured image credit: Rawpixels