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Institutions investing heavily in open banking

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Banking, Inside the Beltway
Friday, December 7, 2018

Open banking has become a prominent strategic initiative among the majority of large banks when it comes to their commercial clients. Research conducted by Accenture found that banks believe doing so is essential to implementing effective digital transformation programs intended to help them achieve double-digit revenue growth.

Through open banking, commercial customers can share financial data securely with banks and third parties, according to Accenture’s report on its findings, titled “It’s Now Open Banking, Do You Know What Your Commercial Clients Want From It?” Using application program interfaces, those clients are able to transfer funds, compare products and manage accounts.

Researchers based their findings on a survey of more than 750 executives at global banks, small- and medium-sized enterprises (SMEs) and large corporations.

Approximately 90 percent of large banks said they have invested in open banking initiatives for their commercial customers or plan to do so next year. Seventy-one percent said they plan to invest as much as $20 million and 24 percent plan to invest more than $20 million to build  their open banking commercial platforms, offer third-party services and explore open banking use cases. Fifty-four percent expect doing so to help them grow their revenues by as much as 10 percent, the report found. Expressing even more optimism, 35 percent indicated they expect open banking to help them grow revenues by up to 20 percent.

Researchers also determined that:

  • Commercial bank customers typically want more innovative processes and a better customer experience – something open banking can facilitate and that is valued by retail bank customers as well;
  • Access to convenient and innovative banking services is the most significant benefit of using an open banking platform, according to 30 percent of executives at large corporations and 23 percent of SME executives;
  • Commercial bank customers expect open banking to enable them to reach more clients and partners (according to 19 percent of large corporations and 25 percent of SMEs) and optimize their processes (according to 17 percent of large corporations and 20 percent of SMEs); and
  • Executives generally believe payments, finance and cash management are the business areas that could most benefit from open banking partnerships.

“While the discussion around Open Banking to date has centered on retail banking consumers, we found that commercial customers are looking for much of the same things from their bank,” Accenture Senior Managing Director Alan McIntyre said in a press release. “Open Banking provides banks an opportunity to use platform ecosystems to deliver more and better services, including helping their SME and large corporate clients extend their market reach and leverage cutting-edge banking services.”

Researchers also found that 35 percent of commercial bank customers already participate in open banking platforms and another 42 percent plan to do so in 2019. When asked who they would prefer to partner with on open banking initiatives, 72 percent of large corporate clients and 65 percent of SMEs cited their bank. About 15 percent of commercial clients said they would prefer to use a non-bank technology provider.

“There’s an influx of nimble, non-bank digital newcomers using open banking innovation to woo commercial firms from their traditional banks,” McIntyre said. “To stave off these competitors, incumbent banks can quickly position themselves as leaders in open banking by adapting business and operating models that embrace platform ecosystems. Banks have a distinct advantage to lead this charge — their existing bonds with their commercial customers built on trust, security and privacy — but they should leave their comfort zone by offering solutions that tightly align with their customers’ needs rather than the products banks want to sell.”

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