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Taking off or going
slow: what is the
optimum pace for open
banking to thrive?
Open Banking. A Global perspective.
The better the question. The better the answer.
The better the world works.
Contents
04
EY Open Banking Opportunity Index: where open banking
is set to thrive
08
Consumer sentiment: will value be the key to unlocking
consumer trust?
Hamish Thomas, Anita Kimber, Wayne Brown
Building consumer trust is crucial to success for banks. The most important
decision for consumers is likely who to trust with their money.
15
Market perspectives.
16 How innovation and security could unlock open banking
in Australia
Mike Booth
Australian consumers are positive but cautious about open banking,
requiring regulators to control security and participants to innovate.
22 How new open banking opportunities can thrive in Canada
Abhishek Sinha and Anthony Reilly
Open banking is progressing steadily. Innovative initiatives and digital
adoption could fast-track delivery of greater value to consumers.
27 How China’s open banking experiment is unfolding
Effie Xin
Open banking is thriving in China, driven by an innovation-focused
economy and the world’s most digitally-connected consumers.
32 How open banking could fast track Hong Kong’s
FinTech innovation
James Lloyd
Open APIs and other digital banking initiatives offer opportunities for
Hong Kong’s traditional financial sector to become a global leader.
36 How innovation can accelerate adoption of open banking
in the Netherlands
Jeroen van der Kroft
Regulatory delays and consumer trust are hindering the open banking
rollout in the Netherlands. How can Dutch banks fulfill their potential?
41 How open banking in Singapore may pivot or remain organic
Andrew Gilder
Singapore is one of the leaders in EY’s Open Banking Opportunity Index,
ranking high across all four Index indicators.
46 How regulation is unlocking the potential of open banking
in the UK
Hamish Thomas, Anita Kimber and Wayne Brown
With strong regulatory direction and industry innovation, open banking in
the UK is off to a positive start.
52 How a rapidly evolving US open banking ecosystem
will take shape
Sean Viergutz
Innovation, collaboration and competition are rapidly shaping the open
banking ecosystem in the US.
57
Meet our leadership team
58
EY Open Banking Opportunity Index 2018 — Methodology
EY Open Banking Opportunity
By Hamish Thomas
EY EMEIA Payments Leader and UK Index: where open banking is
set to thrive
Advisory Banking Technology Leader
Open banking will change the financial services
landscape, but its global acceleration and adoption
will be shaped by four critical pillars.
Open banking is fast becoming a global Yet adoption of open banking varies
phenomenon. Fueled by regulatory widely around the world. The EY Open
action, changing consumer behavior Banking Opportunity Index explores
and the innovation and collaboration just why the pace of change differs
inspired by FinTechs, open banking is across markets and assesses how four
bringing new benefits to customers’ high-level pillars are playing a key role
lives and fresh opportunities for the for open banking to thrive:
financial services industry.
4 | Taking off or going slow: what is the optimum pace for open banking to thrive?
Overview of the four pillars
Regulatory Adoption Consumer Innovation
environment potential sentiment environment
How conductive is What is the potential for How do consumers feel How strong is the environment
the regulatory consumers to adopt open about open banking, at fostering innovation,
environment for open banking services based on and the data sharing especially among financial
banking? existing behaviors? involved? services firms?
For each of the pillars, we assessed a market. We applied a lower weighting to innovation, regulation is not a
wide range of indicators to develop the regulatory environment pillar. pre-requisite for open banking
insight into the conditions in each Unlike adoption, consumer trust and to succeed.
How can two divergent models succeed
in open banking?
The overall index leader board paints a is evolving. The UK and mainland China apart in policy and with markets that
revealing picture of how open banking are clear leaders, despite being poles contrast sharply in key areas.
Divergent regulatory models can deliver strong
open banking environments
UK Mainland China
• A prescriptive model • An organic model
• Banks mandated to use open APIs • Open banking not mandated by legislation
• No mandatory API specifications, but the financial services
• Mandatory API specifications and standardized formats
industry is using open APIs
• Strong innovation environment and adoption potential • Strong adoption potential and innovation environment
• Less data protection, but consumers are comfortable
• Consumers are cautious about sharing data
sharing data
Taking off or going slow: what is the optimum pace for open banking to thrive? | 5
Both countries share strong consumer still have doubts about security and data banking data in exchange for better
adoption potential and innovation protection, customers in Mainland China services.
environments. But while UK consumers are more comfortable opening up their
Regulatory environment — push or pull?
Index results demonstrate that there for the application programming significant use of open APIs, even
is no single regulatory recipe for open interfaces (APIs) that will connect banks though there is no legal mandate to
banking success. and TPPs. The UK’s Open Banking drive this, nor are there any standards
Implementation Entity (OBIE) is also in place.
In the EU, the Revised Payment closely overseeing the development of
Services Directive (PSD2) mandates the market’s open banking ecosystem. The US also wants the market to drive
banks to share data with third-party open banking adoption, although a
providers (TPPs), once consumers Other countries favor a market-driven July report from the U.S. Treasury
consent. UK and German regulators approach. Mainland China discusses how changes to the
have been the most proactive, with demonstrates this best. Here, banks regulatory environment can also
both involved in determining standards and FinTechs are already making support FinTech innovation.
Will consumers embrace or avoid
48%
Consumer worries
open banking?
Open banking will only succeed if it willingness to share information with
wins the trust of customers and makes third parties — about half (49%) say
them feel comfortable about sharing they are comfortable sharing
their data with third parties. But our transaction data with FinTechs for
of negative discussions research shows that, in most markets, better services. Forty percent of
worldwide around open banking consumers still need winning over. Chinese consumers’ online discussion
of open banking was positive.
centered on consumers’ data Consumer trust remains low or Technological innovation in digital
protection and cybersecurity moderate in nine of the 10 markets we payments, as well as government-
concerns. surveyed, irrespective of the regulatory mandated sharing of personal data,
environment. Only customers in may help explain positive consumer
mainland China score strongly in their sentiment in Mainland China.
6 | Taking off or going slow: what is the optimum pace for open banking to thrive?
EY GLOBAL BANKING
Regulation, trust and consumer sentiment
Nascent regulation, high consumer trust Advanced regulation, high consumer trust
6
5 Mainland China
Consumer sentiment score
4
US
Hong Kong SAR Singapore
3
Spain UK
Australia
Canada Germany
Netherlands
2
Nascent regulation, low consumer trust Advanced regulation, low consumer trust
2 3 4 5 6 7 8 9 10 11
Regulatory environment score
Source: EY Open Banking Opportunity Index research.
A matter of trust
Realizing the true potential of open customers that will determine whether platforms, people will willingly share
banking – both for consumers and open banking succeeds. information if they perceive benefit and
financial institutions — hinges on if they can do it via easy-to-use, fun
gaining consumer trust. Regulators can Consumer education about risks and apps. Innovation by financial
play their part by building environments benefits can help accelerate adoption. institutions, particularly in market-
that support innovation and reassure However, perhaps the greatest lever to driven environments such as the US,
consumers. But, as the Chinese shift consumer sentiment will be may convince consumers of the value
experience demonstrates, it is showing customers the payoffs that of open banking and accelerate its
ultimately the ability to engage open banking can bring. As seen with adoption across global markets.
the adoption of popular social media
Taking off or going slow: what is the optimum pace for open banking to thrive? | 7
Will value be the key to
By Hamish Thomas
EY EMEIA Payments Leader and UK unlocking consumer trust?
Advisory Banking Technology Leader
Building consumer trust is crucial to success for banks.
The most important decision for consumers is likely
who to trust with their money.
Open banking is gaining momentum not rank as highly when it comes to
globally — fueled by a regulatory consumer sentiment.
impetus in many markets. It is creating
For open banking adoption to take
opportunities to develop new services
off globally, it is paramount that
that can enhance consumers’ lives and
By Anita Kimber banks overcome the trust hurdle, so
drive loyalty. To fulfil this potential,
EY UK Digital and Innovation Partner consumers feel confident that sufficient
banks must ask their customers to put
data protection and security is in place
faith in a new delivery model, one that
to embrace this new trend.
opens their financial data to an
ecosystem of partners in return for a A major indicator that the industry is
better experience. succeeding will be when customers no
longer perceive open banking as out of
EY’s Open Banking Opportunity Index,
the ordinary. As open banking becomes
which measures the potential for
intrinsic to how better, customer-
open banking to succeed across 10
centric financial services are delivered,
different markets, finds that consumer
consumers will expect this elevated
sentiment toward open banking
service offering as a standard from
could be a major factor affecting its
their providers — with the same
progress. This is the case even in those
guarantees of quality and protection
markets that have established a strong
By Wayne Brown that apply to every other service.
regulatory and innovation environment.
EY UK Advisory Digital Banking
To get there, all of the stakeholders in
Operations Leader The UK, for example, sets the global
the open banking ecosystem — including
benchmark with its regulatory
banks, FinTechs, regulators and others —
framework for open banking but does
will need to play their part.
8 | Taking off or going slow: what is the optimum pace for open banking to thrive?
“
The UK ranks seventh
out of 10 markets for
consumer support
The sentiment landscape
As part of our index, we analyzed social
media and online discussion to gauge
On balance, we found that positive
sentiment outweighed negative
consumer sentiment. This social sentiment across all of the markets
of open banking and listening exercise covered three we assessed, though there were
main areas: substantial differences between them.
sharing of financial European markets — particularly
data. • Open banking: Consumer discussions
talking explicitly about the trend
Germany, the UK and Spain — tended to
have lower net sentiment scores while
EY Open Banking • Sharing financial data: Conversations consumers in Asia-Pacific markets were
Opportunity Index related to the sharing of financial and more positive.
bank data with third parties
• Services: Posts discussing apps,
tools or services of the type enabled
by open banking
EY GLOBAL BANKING
Consumer sentiment insights: Market comparison
Market Net sentiment Positive Neutral Negative
percentage percentage percentage percentage
Australia 37% 40% 57% 3%
China (mainland) 32% 40% 51% 9%
Singapore 27% 32% 63% 5%
Netherlands 23% 30% 62% 8%
Canada 22% 31% 59% 9%
Hong Kong SAR 21% 34% 52% 14%
Global 19% 28% 62% 10%
US 19% 28% 63% 9%
Spain 18% 20% 78% 2%
UK 17% 30% 58% 12%
Germany 9% 23% 63% 14%
Countries are listed by overall net sentiment percentage: The proportion of positive posts minus the proportion of negative posts.
Source: EY Open Banking Opportunity Index; Consumer sentiment analysis conducted by Alva Insights.
Consumer sentiment insights country comparison
Taking off or going slow: what is the optimum pace for open banking to thrive? | 9
40%
Global open banking sentiment
What’s driving sentiment?
Our analysis also identified a series of While another said, “This open banking
discussion themes among the idea is one of the most ill-thought out
consumer content that we harvested. things I have ever heard. It will give
These themes indicate the issues third parties more access to your bank
driving positive and negative sentiment account and if things go wrong, you’ll
The proportion of positive social toward open banking. be liable. This serves banks, not
media posts relating to control customers.”
Of the posts expressing positive
and innovation in open banking.
sentiment around open banking, the These comments highlight legitimate
most common discussion themes were concerns, in that more firms handling
“control” (consumers taking charge of customer data could increase their
their banking data and services) and exposure to fraud if the ecosystem is
“innovation” (the potential for new not managed properly. But they also
types of banking services to emerge). reflect misperceptions, in that most
regulators do not intend that the
But dampening sentiment were liability for fraudulent or unauthorized
discussions on “data protection” and transactions will be borne by
“cybersecurity” concerns, which customers. Rather than serving the
accounted for 48% of all negative posts industry, open banking is primarily
worldwide, as consumers worry about about better serving the customer.
the potential for fraud and the misuse
of their data by third parties. So, how do providers in the open
banking ecosystem persuade
One consumer noted that: “This new consumers with neutral sentiment, as
open banking scheme bothers me a well as convincing those with negative
little. The idea of allowing multiple sentiment, to get over the trust
businesses access to my details threshold to drive adoption?
increases the chances of fraud.”
10 | Taking off or going slow: what is the optimum pace for open banking to thrive?Three ways to overcome the consumer trust threshold
To elevate consumer trust, banks, regulators, FinTechs and others will need to help ensure that progress is made
in three key areas:
1. Cyber protection: Using more
sophisticated digital tools and
techniques to keep consumers’
data safe.
2. Regulatory protection: Embedding
a framework with sufficient
consumer safeguards, including
rights to recourse and penalties for
any providers that contribute to
causing damage against consumers.
3. Adding value: Providing open
banking services that consumers
feel support them in achieving
their goals.
Cyber protection
Open banking models will distribute risks payments, and more effective (ASPSPs) and TPPs can work together
more broadly, but the technologies to monitoring of suspicious and fraudulent to share information on anomalies,
strengthen cybersecurity are evolving all activity. These tools will help to secure fraud or data breaches in real-time, it
the time too. If banks and third-party the open banking ecosystem. Indeed, will help to minimize the impact on the
providers (TPPs) can embrace new the UK’s OBIE is assessing machine- end customer and protect the integrity
security solutions in the right way they based learning and behavioral analytics of the ecosystem.
can create a secure ecosystem. tools to help monitor fraud risk.
For instance, advances in artificial Shared intelligence will be important in
intelligence are already enabling better fraud prevention too. If Account
identity validation and authentication in Servicing Payment Service Providers
Taking off or going slow: what is the optimum pace for open banking to thrive? | 11Regulatory protection
Regulators globally have taken vastly Singapore, for instance, is looking to allowed to affect the customer. From
different approaches on open banking consolidate existing legislation into a the customers’ perspective, the status
policy and implementation to date — new combined regulatory framework. quo should be preserved in providing
and many have work to do to put The Monetary Authority of Singapore access to an immediate refund from
the necessary consumer safeguards (MAS) has said that, “A more calibrated their bank in such cases.
in place. regulatory regime, applied on an
activity basis to payment service When it comes to TPPs accessing
In some markets, regulators are providers, rather than specific payment consumers’ bank account information,
stipulating that firms must meet certain systems, would allow the MAS to better consumers are better protected in
thresholds if they want to participate in address specific issues, such as markets where there is a regulatory
some open banking activities. In the UK consumer protection, access and framework in place to ensure providers
for example, businesses that provide corporate governance.” use an open API mechanism. In markets
payment initiation services must be where such frameworks do not yet
authorized by the Financial Conduct Whichever approach is taken, the exist, for example, the US, there is still
Authority, maintain a minimum of knowledge that participants in open some reliance on “screen-scraping”
€50,000 in initial capital (or higher if banking ecosystems are being practices, whereby consumers are
they provide certain other payment effectively vetted and monitored will be required to share their account login
services) and must hold professional important in providing consumers with details with third parties. In such cases,
indemnity insurance. For account peace of mind. banks may claim consumers have
information service providers, there is breached their online banking contracts
an option to become registered, but Implementing the right protective and so disavow any liability on their
presently, it is only voluntary. mechanisms for consumers that suffer part if customers become fraud victims
losses is critical too. The payment as a result of sharing their login
While the UK is creating a customized, initiation access granted to TPPs may credentials.
targeted approach to open banking, complicate the issue of liability between
other markets are tackling related banks and TPPs where an unauthorized
regulatory change in a different way. transaction occurs, but this cannot be
Adding value
Regulatory and cyber protections are Looking ahead, there are potential financial services across other lifestyle
crucial enablers of trust, but ultimately services that go much further in services such as e-commerce and
helping consumers understand how supporting consumers. In Australia, for creating a vast ecosystem of products
open banking services can support example, there are plans to expand the across sectors. Some are now seeking
them in achieving better financial open banking ecosystem to include to position themselves as lifestyle
outcomes, more easily, could prove the energy, telecommunications and partners for their customers.
most influential factor. eventually other industries such as
health and retail. This opens the door These developments clearly show that
Open banking allows consumers to to services that help consumers financial services providers globally will
get more from their financial services manage other aspects of their lives. need to start using open banking to add
providers as their own data powers Financial services providers could play more value for their customers — if they
better services. Already, open-banking- a role in finding the best deals for want to remain competitive. Over time,
enabled apps offer consumers the customers in these sectors or helping these services, which can help
ability to better monitor their spending, them to switch providers. individuals to achieve both financial and
to get a holistic view of their personal non-financial goals, will simply become
finances or to find more suitable and In Mainland China, where the financial part of the fabric of consumers’ daily
cheaper financing options. These services industry has been quick to lives. And as this unfolds, it is up to the
services are becoming more embrace open banking, banks have industry and regulators to ensure that
mainstream globally. leveraged APIs to expand their they maintain the highest standards of
customer service coverage, offering quality and protection for consumers.
12 | Taking off or going slow: what is the optimum pace for open banking to thrive?What’s the secret to open
banking success?
EY Open Banking Opportunity Index UK and China lead the world phenomenon. But it takes different
explores the key factors that impact the in open banking forms in different countries, and
pace of open banking progress — and adoption rates vary widely. We reviewed
finds that no particular regulatory Fueled by regulatory developments, the status of open banking in several
model will determine success. changing consumer behavior and the key financial markets, ranking its
innovation inspired by FinTechs, open progress across several key financial
banking is fast becoming a global markets:
UK China Singapore
The UK ranked first in our Index, with Mainland China ranks second after the Singapore ranks highly — third in our
success due largely to the world’s most UK, though its laissez-faire regulatory Index, though its organic approach to
prescriptive implementation of open environment is a polar opposite of the open banking so far is limited to the
banking standards and industry UK. Rapid adoption rates are driven by traditional incumbent banks.
innovation. While mass adoption is the enthusiasm of China’s fast- Regulators are prioritizing the stability
probably still three to five years away, expanding digitally-connected middle of the country’s financial sector over
strong regulatory direction and class, which prefer to transact via their mandated openness; however, the
enthusiastic FinTechs set the scene for phone. Mobile banking has taken off approach is not hindering strong rates
a positive open banking future. faster here than anywhere else. of innovation. High trust among
Consumer reluctance remains the consumers signals further adoption.
biggest hurdle, partly due to a cultural
mindset, but also because of some
high-profile data breaches.
8 7
1
9
4 10 2
Overall global 5
ranking
UK 3
China
Singapore
US
Hong Kong SAR
Australia 6
Netherlands
Canada
Germany
Spain
Taking off or going slow: what is the optimum pace for open banking to thrive? | 13US Netherlands Spain
Open banking is being shaped without a The Dutch sector ranks seventh for Spain lags its European neighbors
strong regulatory mandate. Instead, the open banking adoption, with regulatory in open banking, partly due to
worlds’ highest rate of innovation, a delays and consumer reluctance government delays in implementing
thriving FinTech environment and fierce hindering its potential. But, the PSD2. But despite ranking last in our
competition among banks places the US situation should improve in 2019 as the Index, the potential looks positive.
fourth in our Index. Strong consumer Senate moves to legislate the EU’s Spanish consumers are relatively more
sentiment bodes well for future PSD2, which is an important platform willing to share transactional data and
success, though the hands-off approach for open banking in Europe. Winning the EU is set to transpose PSD2 into
of regulators leaves banks to work out the trust of consumers will be the law over the next 12 months.
standards among themselves, which biggest barrier — our survey found only
may potentially slow down progress. 18% of digitally active consumers No one regulatory formula
willing to share transaction data with for success
Hong Kong FinTechs. Our Index results show that no single
It’s a global financial hub, but Hong regulatory model can determine
Kong SAR ranked only fifth in our Index.
Canada
success. Open banking is thriving in
Progress should accelerate with the Its “go slow” approach placed Canada both Mainland China and the UK, which
introduction of a suite of financial eighth in our Index, due mostly to host vastly different regulatory
initiatives. These include the mandated regulatory caution and a lack of environments.
introduction of APIs, the entrance of consumer enthusiasm. While regulatory
virtual banks and a faster payment progress is unlikely until the country The divergent approaches show the
system to support less costly and updates its major privacy law, banks importance of each market taking an
immediate payment transfers across can accelerate their own initiatives, individual approach to open banking.
ecosystem players. particularly in coordinating internal Regulators, governments and the
initiatives, opening their platforms to industry can learn lessons from other
Australia innovators, and proactively promoting markets. However, each should
digital adoption to consumers. ultimately design a regulatory
In 2019, Australia will begin a mandated
framework and innovation initiatives
open banking rollout. Its principles will
also extend to other industries, starting
Germany that suit their own financial sector and
consumer sentiment.
with energy and telecommunications. It’s a global leader in regulatory
But implementation may be slow and readiness, ranking second on that pillar
costly due to the need to reach after the UK, though Germany’s
agreement among a complicated standards are not as prescriptive. But
ecosystem of regulators. Australian despite the positive environment, open
consumers are positive about the banking has yet to reach its potential
potential benefits, though they will need here due to consumer uncertainty
to be convinced that it is safe to share around the concept and cybersecurity
data with FinTechs. concerns.
14 | Taking off or going slow: what is the optimum pace for open banking to thrive?Market
perspectives.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 15How innovation and security
By Mike Booth
EY Australia Banking Technology could unlock open banking in
Australia
Leader
Australian consumers are positive, but cautious about
open banking, requiring regulators to control security
and participants to innovate.
What has been described as Australia’s and innovation in the sector. Australia’s
open banking “revolution” follows timeframe around its phased
extensive reviews by the Productivity implementation of open banking has
Commission and Treasury. Now, after been deferred, but is still ambitious:
extensive discussions among many
interested parties — government, banks, • July 2019: Australia’s major banks
energy and telecommunication firms, will be required to publicly share
FinTechs and consumer groups — its product data for credit and debit
mandatory rollout is underway, starting cards, deposit accounts and
with the major banks in 2019. transaction accounts.
Australia’s version of open banking is • February 2020: Major banks will
delivered through the Consumer Data share credit, debit, deposit,
Right (CDR). This provides consumers transaction and mortgage account
with the right to direct that their data customer and transactional data.
is shared with other organizations they
trust, so they can benefit from its • There will be a phased pilot for
value. This will allow consumers to consumers and other participants
easily switch between financial (other banks, FinTechs etc.)
institutions, compare products and, it beginning July 2019.
is hoped, boost competition, efficiency
16 | Taking off or going slow: what is the optimum pace for open banking to thrive?A complicated regulatory environment
may slow rollout
In our Open Banking Opportunity to thrive in an open banking its regulatory environment is toward
Index, we assessed the readiness of environment. Australia ranked fifth open banking, which came as a surprise
10 different markets around the globe overall, and fourth on how supportive to some who expected a higher result.
EY GLOBAL BANKING
Australia — open banking opportunity index ranking
Overall Regulatory Consumer Consumer Innovation
environment adoption sentiment environment
How conducive is the What is the potential How do consumers feel How strong is the
regulatory environment for consumers to adopt about open banking, environment at fostering
for open banking? open banking services and the data sharing innovation, especially
based on existing involved? among financial
behaviors? services firms?
4 4
5
6
8
Ranking Key: 1 = highest; 10 = lowest
Source: EY Open Banking Opportunity Index research.
While Australia’s regulatory • Australian Competition and CSIRO) sets the technical standards
environment is strong, it’s also Consumer Commission (ACCC) through consultation with the
complicated, with four key bodies creates the rules covering industry.
responsible for setting the new sector designations, outcomes,
framework that will govern open accreditation criteria and the • Office of the Australian Information
banking in Australia. required infrastructure. Commissioner (OAIC) manages data
privacy law changes and adherence
• Treasury drafts the legislation • Data61 (part of government agency, to the Australian privacy principles.
establishing the statutory rights the Commonwealth Scientific and
and powers. Industrial Research Organization –
Taking off or going slow: what is the optimum pace for open banking to thrive? | 17Coordinating across each organization, penalties and data security may be institutions to meet open banking rules.
while securing industry input, is likely difficult — and could delay the rollout. Making the most of open banking will
to be more difficult during the tight depend on their ability to do more than
initial implementation timeframes. A complicated regulatory environment just comply.
Reaching agreement on complex topics is also likely to increase the cost and
of accreditation, consent, enforcement, complexity for Australia’s financial
EY GLOBAL BANKING
Regulation, trust and consumer sentiment
Nascent regulation, high consumer trust Advanced regulation, high consumer trust
6
5 Mainland China
Consumer sentiment score
4
US
Hong Kong SAR Singapore
3
Spain UK
Australia
Canada Germany
Netherlands
2
Nascent regulation, low consumer trust Advanced regulation, low consumer trust
2 3 4 5 6 7 8 9 10
Regulatory environment score
Ranking Key: 1 = lowest index score and 10=highest index score
Source: EY Open Banking Opportunity Index research.
Banks must think beyond compliance
Maximizing the benefits of open For Australia’s big four banks, which but with room to improve. Where are
banking, both for consumers and dominate about 80% of the markets, the greatest opportunities for banks to
financial institutions, will depend on the challenge will be to embrace, rather innovate?
companies’ ability to use innovation to than resist the impact of open banking.
drive more value from the mandated Our Index ranked Australia sixth in At the simplest level, open banking
changes that are on their way. terms of innovation – not a poor result, offers opportunities to financial
institutions to redesign the customer
18 | Taking off or going slow: what is the optimum pace for open banking to thrive?journey, by making it easier to assess, Australian consumers are relatively The innovation environment will
select and manage their finances mature adopters of FinTech services, continue to grow as Australia’s vibrant
through rich interface. For example, with 37% of digitally active consumers FinTech community looks to leverage
banks could, with customer consent, using two or more services. For open banking, and increasing internet
help customers select the most Australia, the adoption challenge will be speeds in rural areas, coupled with
appropriate product, maximize their providing open banking services that rising mobile adoption. This will reduce
savings, avoid fees and monitor their consumers feel support them in consumer barriers to entry.
“financial health” across institutions. achieving their goals. The findings
Banks could also look at the “whole of reflect the interesting disparity of views Moreover, once adopted, Australia has
customer” transactional information among Australian consumers, who are the potential to amplify the consumer
across institutions to advise on mostly urban, often early technology benefits as the CDR expands to other
appropriate loans, or suggest the best adopters, but also have conservative industries.
savings accounts. attitudes toward privacy and security.
Building consumer trust is the priority
Our Index surveyed consumer Australia was the top performer on net FinTechs. They jumped to fifth when
sentiment toward open banking, using online sentiment, with 40% of all posts asked the same question, but with a
online discussion analysis. We found expressing positive sentiment — positive further assurance that there would be
Australian consumers were largely discussion was focused on service effective controls over the security of
positive toward the concept, but trust innovation and consumer choice. In the the data exchange.
around security of data came through consumer survey, Australians ranked
as a concern. ninth on sharing transaction data with
EY GLOBAL BANKING
Consumer sentiment insights: Australia vs. global
Net sentiment Positive Neutral Negative
percentage percentage percentage percentage
Australia 37% 40% 57% 3%
Global 19% 28% 62% 10%
Source: EY Open Banking Opportunity Index; Consumer sentiment analysis conducted by Alva Insights.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 19Educating consumers about the energy, telecommunications and successful in other Asian markets. benefits of open banking, which include eventually other industries such as These models succeed because they offering products and services that help health and retail, banks could consider have a holistic view of customers — them save and better manage their cross-sector partnerships to further including the products and services money, can enable open banking drive innovation. they want and how they like to participants to rebuild trust, and experience them. If banks can use position them to innovate more broadly. Progressive participants can leverage the data available in open banking to This could include using a holistic view their brand beyond finance to offer develop that deep understanding, of consumers’ financial behavior to consumers an entire suite of “lifestyle” they can design and deliver different design entirely new products and services. This is similar to models products and services that add more services. Or, as Australia’s open adopted by some of Australia’s biggest value and build deeper customer banking ecosystem expands to include airlines and retailers, and has proven loyalty. Challenger banks should move early But, open banking is also a huge to move now to understand how to comply, will be in an excellent position opportunity for Australia’s tier-two and compete, rather than wait for the to unlock the value of a market challenger banks. These banks have a compliance deadline. currently dominated by incumbents. further one-year delay to adopt open They will benefit by using their own banking. They could be tempted to use With both the big and smaller banks brand strengths, which are often in this as an opportunity to wait and see. subject to the same open banking rules, customer experience. Tier-two banks However, global experience is that this the challengers have a rare opportunity may want to consider collaborating as delays the compliance activity, leaving to leverage customer insights and gain a group, to better leverage their others to test and learn their market share from the major investment in open banking and competitive positioning and institutions. Those that think cleverly compete more effectively. partnerships. Our advice would be about how compete, rather than just 20 | Taking off or going slow: what is the optimum pace for open banking to thrive?
Competition from global players and tech companies
Both Australia’s big four and tier-two Many of the world’s tech giants already The ability of newcomers to the sector
banks will need to consider strategies to offer payment services. They have to use APIs to access a wealth of
compete against new players in an open won huge consumer favor with customer data previously available only
banking world. Australians who, as our survey found, to incumbents puts them in a position
are relatively mature adopters of to move fast. These new competitors
The commonality of Australia’s open FinTech services —
37% of digitally often bring new technologies and
banking standard with that of the UK active consumers use two or more platforms, a nimble culture and an
and other jurisdictions lowers barriers services. ability to innovate and iterate more
of entry for global companies, both quickly than any incumbent.
from the financial sector and beyond.
Embedding innovation across the business
The onset of open banking in Australia right technology tools and capabilities experience? Can they innovate and
will change the nature of the will be imperative, this is not just a pioneer the next game-changing
competitive landscape, not just in technology problem. Innovation will be ecosystem with frictionless access to
finance but across sectors. Consumers central to success in open banking, but financial products and services? Do
will benefit from better services and standalone initiatives will not be they want to become the go-to
prices, and more choice. For financial enough. Embedding a culture of institution for customers — not just for
institutions, the opportunities to use innovation, collaboration and financial services, but in many aspects
open banking to deepen relationships partnerships will be essential — and may of their lives? And, how could new
with customers, develop new products offer smaller banks and newcomers an partnerships help achieve these goals?
and services, and even explore new edge over the incumbents.
roles are huge — but there will be lots to Whichever strategic direction they
do to unlock the real value of the For Australia’s major banks, open choose, maintaining consumer trust
upcoming changes. banking presents a strategic dilemma must be a priority — without it, banks
about where they would like to position simply cannot move forward to leverage
The key message to all players is to themselves in this new ecosystem. Will the opportunity of Australia’s open
recognize the complexity and diversity they merely comply and risk becoming banking revolution.
of the work required to prepare for relegated to the status of a utility
open banking. While it’s true that the provider? Or move to own the customer
Taking off or going slow: what is the optimum pace for open banking to thrive? | 21How new open banking
By Abhishek Sinha
EY Canada Partner, Technology opportunities can thrive
in Canada
Consulting, FSO Advisory
Open banking is progressing steadily. Innovative
initiatives and digital adoption could fast-track delivery
of greater value to consumers.
Open banking is slowly but steadily To make meaningful progress on the
progressing in Canada. Leading banks open banking agenda in Canada — and
have launched initiatives to study the start delivering greater value to
By Anthony Rjeily opportunities open banking offers and consumers — banks will need to
EY Canada Advisory National Leader, are using APIs to partner with FinTechs consider three key steps.
Digital Transformation to deliver new products. Canada’s
& Innovation 1. Coordinate their internal initiatives
Department of Finance established an
either through an industry group or
Advisory Committee on Open Banking
through regulators to help consistent
in September 2018 to explore the
standards emerge.
potential and pitfalls of open banking
for consumers. The Committee 2. Adopt an open approach to spur
delivered a consultation document in innovation at scale and provide a
January 2019, which identified the level playing field to all participants
potential benefits and risks of open versus the current “walled garden”
banking. The wider stakeholder approach.
consultation that follows will likely
result in legislative action in the 3. Proactively encourage digital
near future. adoption among consumers.
22 | Taking off or going slow: what is the optimum pace for open banking to thrive?It remains to be seen how proactive Canada to place eighth in the EY Open variety of mechanisms and tools,
banks will be, especially since most Banking Opportunity Index, which including “screen scraping” and APIs.
consumers are not clamoring for these assessed the readiness of 10 different
services, at least not yet. But banks markets around the globe to thrive in The Index also shows that most
would be wise to move the initiative an open banking environment. individual markets need to strike a
forward, or risk being caught off guard better balance between implementing
by new competitors that are quickly In the Index, open banking is defined as regulatory structures, building
emerging from within and outside of “online banking and financial services consumer trust and encouraging
the industry. enabled through consumers’ ability to innovation.
offer third-party providers access to
For now, the industry seems to be their personal bank account data and
taking a go-slow approach, leading payment initiation.” TTPs can use a
EY GLOBAL BANKING
Canada — open banking opportunity index ranking
Overall Regulatory Consumer Consumer Innovation
environment adoption sentiment environment
How conducive is the What is the potential How do consumers feel How strong is the
regulatory environment for consumers to adopt about open banking, environment at fostering
for open banking? open banking services and the data sharing innovation, especially
based on existing involved? among financial
behaviors? services firms?
5
8 8
10 10
Ranking Key: 1 = highest; 10 = lowest
Source: EY Open Banking Opportunity Index research.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 23Regulators begin to study the pros and cons
As noted, the Canadian Department of make more informed decisions and Also, Canadian regulators would likely
Finance Advisory Committee released a better manage their finances. wait to take any specific action on open
consultation document that identifies banking until the country’s big data
the potential impact on consumers, Now that the Advisory Committee’s privacy law, The Personal Information
small businesses and the risks to report is released, concrete regulatory Protection and Electronic Documents
consumer privacy, data security and action will likely be 18 to 24 months in Act (PIPEDA), is updated to include
financial stability. the future. One of the big questions is some key provisions, such as data
whether Canada will adopt a more portability, outlined in the General Data
The Canada Department of Finance has prescriptive approach, similar to the Protection Regulation (GDPR) in Europe.
said that making it easier for people to UK, or continue down a principles- Having the right legal framework in
let third parties access their banking based regulatory framework. A place to manage customer privacy and
data could spur providers to offer more principles-based approach, in this consent before layering open banking
tailored products and services, and context, is likely to lead to variability in on top will be essential for success.
thus start delivering greater value to standards and a hurdle to innovation. These factors help to explain why
consumers. In addition, customers That might depend in part on how Canada’s open banking regulatory
could benefit from greater willing banks are to pursue open environment ranked 10th in the Index.
transparency, helping them to banking on their own.
EY GLOBAL BANKING
Regulation, trust and consumer sentiment
Nascent regulation, high consumer trust Advanced regulation, high consumer trust
6
5 Mainland China
Consumer sentiment score
4
US
Hong Kong SAR Singapore
3 UK
Spain
Australia
Canada Germany
Netherlands
2
Nascent regulation, low consumer trust Advanced regulation, low consumer trust
2 3 4 5 6 7 8 9 10
Regulatory environment score
Ranking Key: 1 = lowest index score and 10=highest index score
Source: EY Open Banking Opportunity Index research.
24 | Taking off or going slow: what is the optimum pace for open banking to thrive?Millennials could help drive adoption
Given this background, it is not boomers and older senior citizens still other countries. For now, however,
surprising that Canada ranked 10th in prefer visiting branches and talking to the features and products offered in
the Index for consumer adoption customer service staff face-to-face. Canada are not nearly as advanced as
potential: only 18% of its digitally active Canada’s demographic skews toward in the European, Asian and Australian
population are using two or more these age groups. markets. This comparatively limited
FinTech services, and only 44% of value proposition might be delaying
smartphone users have adopted mobile But there is every reason to believe that the adoption potential among younger
banking. However, those are averages. adoption potential among younger demographic segments.
Consumer behavior differs by consumers — millennials in particular —
demographic segment. Many baby is much higher and more in line with
Consumer sentiment remains a hurdle
In general, open banking is generating According to the Index, Canada placed forums. Overall, 31% of consumer
less interest among consumers in eighth in terms of consumer sentiment social media posts and comments were
Canada than in the US. However, among global peers. The consumer positive and 9% were negative, for a net
Canadian consumers are becoming sentiment analysis in our Index was positive score of 22%.
more enthused about the possibilities derived from social media, blogs and
of open banking.
EY GLOBAL BANKING
Consumer sentiment insights: Canada vs. global
Net sentiment Positive Neutral Negative
percentage percentage percentage percentage
Canada 22% 31% 59% 9%
Global 19% 28% 62% 10%
Source: EY Open Banking Opportunity Index; Consumer sentiment analysis conducted by Alva Insights.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 25This overall score derived from sub- • Services: posts that discuss apps, innovation accumulating 19% of
scores in three broad categories: tools or services of the type enabled negative posts. Data protection was the
by open banking. The net positive subject of 15% of negative comments.
• Open banking: posts mentioning sentiment was 25%.
“open banking” explicitly or referring The bottom line is that many Canadians
to the revised PSD2. The net positive Discussions about innovation (38%) are uncomfortable sharing their data
sentiment here was 21%. were by far the top driver of positive online; however, that sentiment is
sentiment. Consumers’ major concern improving as more innovative offerings
• Sharing financial data: posts that was cybersecurity, which accounted for emerge, at least among younger
discuss sharing of financial or bank 41% of all negative posts on open consumers.
data with third parties. The net banking. There is also clearly some fear
positive sentiment was 36%. and skepticism of change, with
Innovation projects begin to take root
Among the four pillars, Canada’s Data aggregator Flinks already claims The Platform Organization (also known
innovation environment was the to connect to more than 250 million as PLATO) is a group within Scotiabank
strongest of the pillars, placing Canada Canadian financial accounts, and that rapidly develops new services and
in fifth place. Canada has a thriving several of the big banks have tools. It is now sharing applications it
FinTech industry, plenty of private announced individual initiatives of their has developed with the open-source
investment, government support for own. In March, RBC was the first large software community. While neither of
start-ups, with Toronto ranked as a Canadian bank to launch an API these initiatives are technically open
leading global tech hub. The Index developer portal. The portal will allow banking, they will lay the important
ranked Canada third after China and eligible external software developers, groundwork for future open banking
the US for the number of patents filed industry innovators and clients to initiatives.
by its main banks and FinTechs in access select RBC APIs so they can
2017. It also ranked first for its more easily integrate the bank’s
broader research and development services into their own products.
environment.
Open banking’s future in Canada
Open banking in Canada does not yet banking makes possible. Banks that are For these reasons, we believe it is
exist as it does in the other markets in prepared can better withstand critical that banks follow these three
the Index, and considering the current competition, and perhaps become the steps to move open banking forward:
environment, the transition toward competition — winning new customers coordinate their internal initiatives,
open banking is more cautious. from those not as advanced in open open their platforms to innovators, and
banking. Bankers should also bear in proactively promote digital adoption to
But there are powerful incentives for mind that regulators may become more consumers. If these steps are taken, it
banks to pick up the pace. It is likely assertive if the industry resists could put Canada on the fast-track to
that consumers will begin to demand adopting technology that is deemed in delivering greater value to consumers.
the kind of individually tailored the best interest of consumers.
products and services that open
26 | Taking off or going slow: what is the optimum pace for open banking to thrive?How China’s open banking
By Effie Xin
EY Principal and Financial Services experiment is unfolding
Greater China Advisory Leader
Open banking is thriving in China, driven by an
innovation-focused economy and the world’s most
digitally-connected consumers.
EY’s Open Banking Opportunity Index innovation environments, but differ
offers a view across 10 markets, significantly in terms of the regulation
revealing insights into the indicators for that underpins open banking.
open banking to thrive in one country
and lag in another. One of the most And while it’s widely acknowledged that
interesting findings is that the Index’s the UK’s approach is the global
top two ranked countries — the UK and benchmark in our Index, China’s less
Mainland China — share strong regulated approach has yielded results
consumer adoption potential and that have defied many expectations.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 27EY GLOBAL BANKING
Mainland China — open banking opportunity index ranking
Overall Regulatory Consumer Consumer Innovation
environment adoption sentiment environment
How conducive is the What is the potential for How do consumers feel How strong is the
regulatory environment consumers to adopt open about open banking, environment at fostering
for open banking? banking services based on and the data sharing innovation, especially
existing behaviors? involved? among financial
services firms?
1 1
2 2
8
Ranking Key: 1 = highest; 10 = lowest
Source: EY Open Banking Opportunity Index research.
In China, the lightning-fast development across sectors. Now China’s banks are allowing industries to develop through
of open banking reflects the rapid using their open banking portals to experimentation and stepping in to
growth of the internet and smartphone, redefine their entire role, positioning tackle problems as they appear. The
which are now central to everyday life themselves not just as financial Government is treading carefully,
for Chinese consumers. The internet institutions, but as technology anxious not to slow down innovation,
has enabled the creation of direct companies and lifestyle partners for but instead establishing frameworks
banking, which allows consumers to set customers. that support its growth in a manner
up online accounts to access banking that offers greater protection to
services without ever setting foot in a Until recently, much of the growth in consumers.
branch. Direct banking was adopted China’s open banking has occurred in
by both traditional banks and a host the absence of any mandates, API China reportedly will introduce
of new start-ups with no physical standards or regulatory protection of regulation that mirrors that of Europe’s
branches – there are now more than customer data. But this is changing, GDPR, though timing of any
3,000 banks in China. with Chinese regulators cracking down implementation is unclear. It is
on the questionable practices of some expected that regulation of China’s
As direct banking grew, banks peer-to-peer (P2P) lenders and open banking sector will continue to
leveraged APIs to expand their cryptocurrency traders. unfold as the country considers its
customer service coverage, offering evolution in other markets.
financial services across other lifestyle China’s approach to regulation, both in
services such as e-commerce and the financial sector and beyond, is best
creating a vast ecosystem of products described as pragmatic and organic —
28 | Taking off or going slow: what is the optimum pace for open banking to thrive?78%
Consumer adoption
The world’s most connected consumers
A laissez-faire approach to regulation transactional data with FinTechs.
may have allowed the expansion of Roughly half of the online discussions
open banking in China, but demand about open banking were positive,
from China’s fast-expanding, digitally- focusing on its benefits of innovation
connected middle class is the biggest and new services.
of China’s smartphone users driver for its success. Today’s typical
have adopted mobile banking Chinese consumer carries no cash, or
69%
apps, more than any other even cards, preferring to transact via FinTech services
mobile banking, which has taken off
country in our index.
faster in China than anywhere else in
the world.
This high digital adoption rate is
encouraged by Chinese consumers’
willingness to share data with
institutions. Unlike banking customers
in many western economies, our of the digitally-active population
consumer sentiment research indicates
uses two or more FinTech
that consumers in China were more
positive and happy to share their services.
EY GLOBAL BANKING
Consumer sentiment insights: China (mainland) vs. global
Net sentiment Positive Neutral Negative
percentage percentage percentage percentage
China (mainland) 32% 40% 51% 9%
Global 19% 28% 62% 10%
Source: EY Open Banking Opportunity Index; Consumer sentiment analysis conducted by Alva Insights.
Taking off or going slow: what is the optimum pace for open banking to thrive? | 29Chinese consumers are happy to swap data for services
While Chinese attitudes to data security sharing information. The pace of financial services, is dizzying, with
may be, in large part, explained by Chinese progress in creating innovative China rating second only to the US in
cultural norms, it’s clear too that products and services, including in terms of innovation in our Index.
consumers perceive big payoffs for
EY GLOBAL BANKING
Regulation, trust and consumer sentiment
Nascent regulation, high consumer trust Advanced regulation, high consumer trust
6
5 Mainland China
Consumer sentiment score
4
US
Hong Kong SAR Singapore
3
Spain
Australia UK
Canada Germany
Netherlands
2
Nascent regulation, low consumer trust Advanced regulation, low consumer trust
2 3 4 5 6 7 8 9 10
Regulatory environment score
Ranking Key: 1 = lowest index score and 10=highest index score
Source: EY Open Banking Opportunity Index research.
In the past, this innovation may have is thriving, with young entrepreneurs services specifically geared to the
been largely derivative of that seen in inspired by the success of tech Chinese consumer. In 2017, China
Western economies, but no more. A magnates (such as Alibaba founder registered more FinTech patents (171)
vibrant homegrown innovation culture Jack Ma) to create products and than any other country.
30 | Taking off or going slow: what is the optimum pace for open banking to thrive?You can also read
