Open Banking was touted as the catalyst for increased innovation, but two-fifths of banks are worried about it and its regulation.

According to research from platform Tink, 39% of financial institutions see Open Banking regulation as the biggest current threat to their business model.

In addition, 56% of them fear that loyalty from customers will be significantly reduced by Open Banking.

However, 68% of respondents recognised that financial institutions must now enhance their services to attract and retain customers. Also, three-fifths (61%) believed that financial institutions who only do the minimum required to comply with PSD2 will lose out to more innovative players.

Regulation problems

There are issues though. Regulatory compliance (91%), access to tech (91%) and access to talent (91%) topped the list of challenges.

Other hurdles included:

  • Finding and collaborating with new partners in fintech (90%);
  • Technology and modernisation (88%);
  • Overcoming resistance from internal stakeholders (87%), and
  • Commercialising Open Banking opportunities (87%).

Daniel Kjellén, co-founder and CEO of Tink, said: “Technology has torn down the barriers to data and created an opportunity for everyone – incumbent banks, fintech challengers and developers – to build great products. PSD2 and Open Banking regulation are acting as a rubber stamp for this movement.

“Understandably, this is causing disruption and uncertainty in the banking industry as financial institutions have had to come to terms with big changes over a short period of time. And while a majority of are starting to recognise the long-term benefits of open banking, there are still concerns and challenges that must be overcome in the race to meet the regulatory deadline.”

He continued: “Encouragingly we are seeing a pioneering new generation of banking leaders rising to the open banking challenge – leapfrogging legacy tech, embracing partnerships and bypassing traditional ways of working. They see an opportunity to exemplify the true spirit of the open banking movement – transforming business models and creating the truly customer-centric services of the future.”