The new study - Open Banking: Opportunities, Challenges & Market Forecasts 2020-2024 - by Juniper Research identified that Open Banking can be both a threat and an opportunity for traditional banks.
Juniper Research says the “extraordinary growth” is being driven by Europe, where the regulator-led approach to Open Banking has created a standardised market, with low barriers to entry - contrasting with markets like the US, where a lack of central regulatory intervention is limiting growth potential.
According to Juniper Research, while Open Banking exposes user information and access to potential competitors, this threat is equal to all players in the market, and the ongoing Coronavirus pandemic is increasing the need for consumers to aggregate accounts and gain insight into their financial health - boosting momentum in Open Banking adoption.
As such, the research recommends that established banks create innovative Open Banking services that provide user benefits, and attract customers from less innovative competitors.
Research author Nick Maynard said banks must embrace Open Banking as a chance to capitalise on their ongoing digital transformation journeys and introduce innovative services enabled by Open APIs, “or risk losing out to more digitally-agile competition”.
The research identified that payments will be critical to the emerging Open Banking ecosystem, accounting for over US$9 billion in transaction value in 2024.
However, Juniper Reseach says that payments within this ecosystem are at an early stage.
The study highlights that eCommerce is dominated by card networks, but Juniper Research says there is potential for this role to be eroded over time by ‘direct from account’ payments.
The research recommends that card networks should offer Open Banking-enabled payment services to offset the risk of future disruption.