Open Banking came into force back in 2018 as a means of making the commercial finance industry more transparent, accountable and fair. It’s something that fintechs jumped on with relish and it’s fast becoming standard practice in the UK.
Now, as we move into the depths of 2021 on the third anniversary of PSD2, the growth seems even more significant. But the landscape in the UK is very different from the EU, particularly post-Brexit. What are the differences between the UK & the EU open banking landscapes and what lessons can both learn from each other?
It’s undeniable that continental Europe has a lot of catching ups to do compared to the UK. The problem is that Europe is just a vast and varied continent that can’t be counted as a single entity like the US. There is a general consensus among regional operators that Europe is a definite growth market, with some major players already making inroads in Germany, France and Italy.
Almost three-quarters of US banks are spending more on open banking now than they were last year but in Europe, it’s a little lower with only 61% of firms spending more on opening up. European institutions are also generally not spending as much on this transformation. However, with COVID catalysing a faster and more profound shift to digital, it seems like something of a no-brainer for those still lingering on the sidelines to go all-in.
The performance of APIs across the market is significantly stronger in the UK because the largest banks in the country were ahead of the game. They already had their APIs in place back in January 2018 when it all kicked off and because of slightly different European regulations, many Euro banks didn’t set up their own APIs until the end of 2019. So they are roughly 18 months behind, but there is also the fact that the UK generally has a more forgiving regulatory landscape.
The post-COVID future
It’s estimated that due to the impact of COVID-19 the average UK family is due to be around £500 worse off every month. There is also unlikely to be any kind of recovery until at least 2022. It’s undeniable that the rest of Europe hasn’t exactly completely avoided the negative effects of the pandemic but the UK will undeniably be on the back foot for the foreseeable future. Europe should use this time to play catch up and embrace open banking by helping banks to cooperate (there are many more major European banks than major UK banks, after all) and work together to define standards for implementing open banking on the continent.
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