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NatWest calls on collaboration between banks, fintech and regulators to solveopen banking “economic obstacles”
The obstacles flagged by NatWest include a “lack of commercial incentives” to develop new user cases and a lack of alignment between banks on the benefits of open banking.
Banking giant NatWest is calling for banks, fintechs and regulators to collaborate to resolve “economic obstacles” that are holding back wider adoption of open banking.
The obstacles flagged by NatWest include a “lack of commercial incentives” to develop new user cases and a lack of alignment between banks on the benefits of open banking.
NatWest commissioned Oxera, an economics and finance consultancy firm, to produce the report.
The aim of the report is to provide economic analysis and insight that will support the forthcoming decision-making on the next phase of open banking in the UK.
Since launching in 2017, open banking has enticed over 7m businesses and consumers, which is around 10 per cent of UK consumers and SMEs.
Open banking payments are still dwarfed by more traditional payment options like cards or direct debits.
The report highlights the economic challenges that currently prevent open banking from reaching its full potential.
These include a lack of commercial incentives to develop or enhance APIs, and a lack of alignment between ASPSPs (Account Servicing Payment Service Providers on the benefits of Open Banking, the report highlights.
There are also significant challenges around managing trade-offs, for example in relation to security and convenience, within the Open Banking ecosystem.
The report suggests three possible paths forward to address these challenges
-Mandate banks to offer a wider range of use cases: Expand the scope of Open Banking and require banks to provide the necessary data via APIs for free.
-Commercialised APIs: Encourage banks to expand Open Banking use cases through Premium APIs.
-Multi-party system: Enable multi-party systems to emerge that have a commercial incentive to grow the Open Banking ecosystem through the design of new, flexible frameworks for industry collaboration.
Claire Melling, head of bank of APIs at NatWest Group (pictured), said: “This report makes it clear that banks, fintechs and regulators need to work together to design new, flexible frameworks and commercial incentives that will support a far wider range of Open Banking use cases.
“By acting on the recommendations in this report, we can enable Open Banking to reach its full potential and, ultimately, deliver new and enhanced propositions that will improve customer choice and experience.”
