What will the open banking landscape look like in 2023?

Open banking has, for lack of a better word, revolutionized the way financial institutions interact with their customers. In one form or another, the idea of ​​”open banking” has been around since the late 1990s, when banking institutions across Europe (mainly in Germany) sought to break the bogus approach to banking. Cut to today and the idea of ​​”open banking” is gaining momentum on a daily basis as the technology needed to implement the ideal develops at an incredible pace.

Open banking is quickly becoming the basis for a new generation of financial services apps and platforms that are greatly impacting the way consumers and banks manage their money and services. However, there is still a long way to go for open banking to help improve financial literacy, trust and engagement with consumers and their financial institutions.

Is there trust in the technology?

Back in September, we launched our very first ‘Banking Disruption Index’, a quarterly assessment of consumers’ attitudes towards the bank’s digital capabilities. We launched the index to understand whether consumer sentiment towards digital banking is developing at the same pace as innovation across the sector, and whether the banks – traditional and challenging – need to reassess their digital offering. Our first index from the 3rd quarter showed that there were a number of areas for improvement within banking services, not least trust.

Our data showed that 48% of people do not trust their bank to help them manage their finances during a recession (which we have now added since this data was recorded). With less than half of consumers currently trusting their banks at a time of intense financial uncertainty, how can these banking institutions and open banking platforms expect to achieve trust when the engagement is clearly not there?

As we enter 2023, consumers and banking institutions (both new and old) are battling a cost-of-living crisis that affects confidence independently. This impact on financial confidence could have long-term consequences if action is not taken to help strengthen the faith that companies and consumers have in their money and how it can best be managed. This is where the value of open banking financial transparency comes into its own.

A perfect example of this is featured in Open Banking’s (the organisation’s) Impact Report back in June which showed that a large proportion (77%) of respondents stated that they now have more immediate and accurate insight into their financial position at all times as a result of the use of open banking services. These services included real-time transactions, cloud accounting and greater accessibility to accounts to name a few.

Open banking’s impact on the future of consumer finance

The importance of consumer confidence in the economy could not be underestimated. In our index, we know that as of September this year, overall consumer satisfaction with the banks (out of 100) was 79, a high score for the first index which highlights an above-average level of consumer sentiment in banking institutions but once again insinuates that there is room for improvement,

It is the innate aspects of open banking that are largely to thank for the result of this relatively high level of banking sentiments such as seamless and real-time transactions, increased transparency and a drastic improvement in communication between the banks and their customers.

Another reason why banks are rewarded with a high level of satisfaction from their customers is their current ability to keep up with the growing technological trends in the space. Our data shows that around 70% of consumers believe their bank is keeping up with technology quickly enough. With open banking capabilities at the forefront of current trends and themes offered to modern customers, this openness to engage with new technology from banking institutions puts them in a strong position to build on in 2023 with increased collaboration with open banking APIs.

All aboard in 2023

The stage is set for 2023 to be another strong year for open banking. Sentiment around greater technology implementation in banking and financial control is high, and with the difficulties facing consumers as the cost of living crisis and recession continue into the new year, banks, apps and open banking platforms have an opportunity to demonstrate the value of their products in the most crucial times .

Through open banking in 2023, consumers can improve clarity around their finances, improve their financial literacy and, most importantly, not have to sacrifice anything when it comes to security, with full transparency about where and how their transaction and account data is being used – all while improving customer service .

About the author: Richard Kalas is Client Solutions Director, Retail Banking at GFT UK, specializing in the digital transformation of companies.