European banks are moving towards open finance

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Across Europe, banks are moving beyond open banking and PSD2 requirements, gradually shifting to open finance, according to a new report from open banking startup Salt Edge.

The paper, titled The State of Open Bank Payments in Europe in 2021, is based on testing of more than 2,500 PSD2 APIs from 31 European countries.

The analysis found that, as required by law, the UK’s CMA9, or the country’s nine largest banks, are primarily those in the region that share data on a greater number of account types.

Nonetheless, continental European banks are slowly expanding the dataset made available through open APIs, gradually evolving into open finance.

In particular, banks in France, Denmark and the Netherlands have proven to be among the first to provide access to information on credit card transactions, mortgages, savings and investment accounts, for example.

Of the more than 2,500 regulated APIs integrated by Salt Edge across Europe, 10% of banks provide access to credit card transaction information, 9% provide access to savings account information, and 5% provide access to mortgage account information.

Open funding under the EU’s digital finance strategy

Open finance is the next step in the open banking journey of enabling third-party vendors to access customer data across a wider range of financial industries and products, including savings and investments.

Legislation like Australian consumer data law are putting the basis for data sharing not only in the banking sector, but also in other sectors, including insurance, investments, energy and telecommunications.

In Europe, an open funding framework is currently being developed with the hope of greater data-driven innovation in the financial sector. Building on the progress made with the historic revision of the Payment Services Directive (PSD2), the new legislation will seek to further improve data sharing and openness between and within sectors. A legislative proposal for the framework is expected by mid-2022.

The open funding framework is part of the wider program of the European Commission (EC) Digital finance strategy, which defines the key priorities for the development of digital finance.

These priorities include removing the fragmentation of the digital single market by reducing regulatory consistency and facilitating cross-border activities, adapting the European Union (EU) regulatory framework to encourage digital innovation, especially in the areas of artificial intelligence (AI) and cryptoassets / blockchain technology, promoting data-driven innovation in the broader financial sector and addressing the challenges and risks associated with digital transformation.

Europe shows progress in implementing open banking

Open banking has made considerable progress in Europe in recent years. The Salt Edge report notes that API availability among banks in Europe has improved significantly since 2020 with the highest performance recorded this year by institutions in the UK, Czech Republic, Portugal, Austria, Netherlands and Belgium.

API availability rate is measured by the percentage of API requests sent by Salt Edge that have been accepted by bank APIs and responded to successfully.

Top 6 EU countries with the highest API availability, 2021 vs 2020, Source: Salt Edge

Top 6 EU countries with the highest API availability, 2021 vs 2020, Source: Salt Edge

Salt Edge also notes that several institutions stand out, offering a seamless one-day onboarding process, dynamic third-party vendor registration, fast communication, and clear documentation.

These banks include Commerzbank and N26 from Germany, La Banque Postale from France, Raiffeisen Bank from Austria, Banca Popolare di Sondrio from Italy and OTP Bank from Hungary.

Changing customer expectations, changing market dynamics and changing regulatory landscape have pushed open banking to become one of the hottest trends in fintech. Just this week, Mastercard finalized the acquisition of Aiia, a European open banking technology provider formerly known as Nordic API Gateway, a deal that comes just months after Visa bought Swedish open banking platform Tink for 1.8 billion euros.

In Switzerland, the deployment of open banking remains at a much earlier stage than the regulated EU, despite strong consumer interest in the use cases and the opportunities this trend brings.

A Mastercard survey, which surveyed more than 1,000 Swiss consumers earlier this year, found that among those polled who had never heard of open banking before, 14% expressed interest after receiving a definition. generic, a level that increased significantly (52%) when consumers received explanations of actual open banking use cases.

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