A new report divides up countries as pioneers, followers and conservatives in open banking. And in spite of the push from PSD2, not all EU countries are doing particularly well, writes Brian Caplen.
Sweden, the UK, the Netherlands, the US and Singapore all emerge as open banking 'pioneers' in a new report. These are countries with both a high degree of readiness and the potential to take forward open banking (allowing non-banks to compete with existing players).
By contrast, Brazil, India, Italy and South Africa are all flagged up as 'conservatives', in having both less potential and being less well prepared. Also in this category is China, even though (or maybe because) huge advances in payments have been made by big tech firms such as Alibaba and Tencent rather than the country's banks. In the middle are 'follower' countries such as Australia, Belgium, France, Germany and Spain.
The Payment Open Banking Assessment has been devised by Capgemini and appears in the latest World Payments Report done in partnership with BNP Paribas. Readiness has been assessed in terms of market competition, adoption of common standards and data sharing between banks and third parties and how far along a country is in terms of instant payments. Potential is a matter of smartphone penetration together with government initiatives to promote innovation and competition.
The report notes that countries with high per capita non-cash transactions such as Sweden, the UK and Netherlands have tended to lead the way. The US is an interesting case because the initiative there has been mostly down to the banks in the absence of a push from the regulator, as has happened in Europe.
But while the EU's Payment Services Directive 2 has helped push open banking, the impact has not been felt everywhere. France and Belgium have sought to protect existing systems and participants, says the report, and Belgium is lacking fintech players to provide competition. "Italy demonstrates how a pan-regional regulation such as the PSD2 can vary in its implementation and delay the realisation of benefits compared with other EU countries," says the report.
Open banking is one of a number of factors disrupting the payments landscape and moving it closer to a tipping point whereby the banks either adopt a platform model to rival the big tech companies or lose out to them. Other factors include the wealth of new technology from artificial intelligence to blockchain to the Internet of Things, as well as changing customer expectations. Banks have the potential to play an anchor role in bringing all this activity together in an ecosystem, but the report finds that only 38% of banks have a plan to do this.
Brian Caplen will be chairing a panel session on the World Payments Report at Sibos in Sydney on October 23.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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