Users of ‘open banking’ services are set to double by the end of next year, according to new research.
Juniper Research’s report forecast that the number of people using API technology to aggregate bank accounts and access new services would increase from 18 million at the end of 2019 to 40 million in 2021.
The report – Open Banking: Opportunities, Challenges & Market Forecasts 2020-2024 – also found that the COVID-19 pandemic was “increasing the need for consumers to aggregate accounts and gain insight into their financial health”, which would in turn boost the momentum of adoption of open banking principles and technology.
Growth in open banking was being led by Europe, Juniper reported, where regulators had pushed through standardization and reduced barriers to entry. Take-up was also advanced in the Far East and China, its data showed.
In the US, however, a “lack of central regulatory intervention” was likely to limit the potential growth of open banking users, Juniper said.
Research author Nick Maynard added: “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.”
Payments made through open banking technology were expected to reach $9 billion by 2024, according to Juniper’s research, as APIs increasingly facilitate secure “direct from account” payments.
The research company said credit and debit card providers should embrace open banking technology to ensure they are not disadvantaged by this shift.
Already in 2020, Juniper’s report said, open banking “has made significant progress” – despite the challenges presented by the COVID-19 pandemic.
“Offering a superior open banking experience can be a compelling differentiator as part of a wider digital app experience,” the report said. “Open banking also creates a level playing field in markets where regulatory intervention has led to open banking deployment.”
Juniper also highlighted that open banking could be “both a threat and an opportunity for traditional banks”.
“While open banking exposes user information and access to potential competitors, this threat is equal to all players in the market,” the report said.
“Therefore, established banks must create innovative open banking services that provide user benefits and attract customers from less innovative competitors.”
Open banking as a principle emanated from European Union reforms in 2015 that were designed to make it easier for customer to switch between banks. The technology facilitating this also allows for easier real-time payments and money transfers, and has fuelled the rise of many so-called ‘challenger banks’ and digital payment services.