Predictions are kind of our thing. At Nordigen, we’re helping banks and lenders make better predictions about their loan applicants using Open Banking. Having made numerous past forecasts about its applications, we think it’s high time to make a few predictions about the future of Open Banking itself.
2018 was a great year for Open Banking. Global banks like ING, Deutsche Bank, HSBC, and others launched their Open APIs. The 18-month timer for PSD 2 implementation was finally initiated. Global account aggregators, such as Plaid, raised large investment rounds to advance access to account data. We have a strong feeling about where Open Banking is headed.
Here’s what we predict will happen in 2019:
Demand for “screen-scraping” will increase
Financial institutions preparing to meet the Regulatory Technical Standards (RTS) of Open Banking are currently facing a shortage of live Open APIs. For any bank that wishes to prepare for the Open Banking era, the only viable choice is using account aggregators that provide solutions based on “screen-scraping”. The good news is that there’s a variety of account aggregators to choose from and they all offer similar services.
Account aggregator supply will increase
Thriving demand drives supply. Apart from a growing list of account aggregators that offer account information services, there are currently over 20 companies in the UK alone with Account Information Service Provider (AISP) licenses promising to deliver Open APIs.
On top of that, credit bureaus are further fueling the adoption of account aggregation — Experian has partnered up with Unnax — an Open Banking API provider to improve its scoring models and estimate borrower capacity, and Equifax has partnered with Instantor to do the same.
The price to access data will decrease, significantly
Excess supply normally creates a market surplus when the quantity supplied is greater than the quantity demanded. That is what we see happening with account data — we are confident that the growing number of AISP license holders and aggregators will drive the account data price down both in Europe and globally. This is naturally excellent news for banks and lenders as they will adopt Open Banking with more ease and invest the excess capital in building better customer experiences on top of the raw account data.
Here’s what we've been up to recently.
In recent years, tech giants like Apple, Google and Amazon have started planting flags in the financial sector, intruding on traditional financial institutions. Facebook is finally joining the race with Libra, its digital currency described as a “simple global currency and infrastructure that empower billions of people.”
As a society, we are gradually moving away from paper cash, increasingly gravitating towards alternative digital payment methods - contactless-cards, cryptocurrency, mobile and wearable technology. Regulatory driven initiatives like EU's PSD2 and UK's Open Banking are propelling financial innovation and enabling the emergence of new products and services.