Global Open Banking Market Research Report: Forecast (2024-2030)

Market Definition

Open Banking is a system that enables external financial services to securely retrieve and utilize information from a user's bank account. This sharing of data is facilitated through standardized interfaces, or APIs, which ensure a secure and controlled exchange of information between banks and authorized third-party providers. This practice is designed to promote innovation, competition, and the development of new financial services by allowing external entities to build upon the existing infrastructure and offer more tailored and innovative solutions to consumers.

Market Insights & Analysis: Global Open Banking Market (2024-30):

The Global Open Banking Market size was valued at around USD 22.31 billion in 2023 and is estimated to grow at a CAGR of about 25.47% during the forecast period, i.e., 2024-30. The banking industry is undergoing a digital revolution, with emerging digital banking innovators earning consumers' trust. At the same time, established institutions are intensifying their digital transformation efforts, positioning themselves to preserve & expand their customer base. As per the Global Digital Banking Index 2021, across the 28 countries surveyed, the number of consumers with a digital bank account represented 23% of the population and an estimated 450 million customers.

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Additionally, as financial institutions expedited their digital transformation efforts to stay competitive, they modernized their systems and infrastructure. Owing to this, they are securely opening up their data and services to third-party providers, supporting the market expansion.

Furthermore, countries in regions like the Asia-Pacific and the Middle East are actively promoting digitalization, fostering an environment conducive to the digital transformation of the financial sector. This encouragement is driving financial institutions to make investments in open banking, further contributing to the expansion of the Open Banking Market in the future years.

Global Open Banking Market Driver:

Surging Government Support to Augment the Market Growth – In an era of globalization, governments worldwide recognize the significance of fostering connections between their financial institutions & consumers and their international counterparts. This has led countries like the UK, Mexico, and the US to actively endorse the adoption of open banking services, simplifying cross-border financial transactions & enriching global trade relationships. Moreover, over the past decade, North American and European nations have taken a proactive stance in democratizing access to financial products & services.

Notably, the European Banking Authority introduced the Payment Services Directive Two (PSD2) in 2015, formally inaugurating the era of open banking. Subsequently, the UK's Competition and Markets Authority (CMA) issued progressive guidelines mandating banks to embrace open banking practices by 2018. These regulatory mandates compel banks to open up their closely held financial data to third-party providers, an initiative that has encouraged a growing number of entities to participate, further driving the Global Open Banking Market.

Global Open Banking Market Opportunity:

Reshaping of Financial Landscape by Introducing Central Bank Digital Currencies (CBDCs) – Many countries are exploring or implementing Central Bank Digital Currencies (CBDCs) which are digital versions of national currencies issued by central banks. These initiatives are driven by a desire to modernize the financial system and enhance monetary policy. According to the Atlantic Council’s GeoEconomics Center’s Central Bank Digital Currency (CBDC) Tracker, as of 2023, more than 10 countries have successfully launched digital currencies, and China is set to expand beyond its pilot CBDC in 2023. Notably, China's digital yuan, one of the largest CBDC programs globally, commenced its pilot project in 2014.

Moreover, as per the International Monetary Fund, as of 2023, more than 100 countries are in the exploration stage. As countries embrace digital currencies, banks would be compelled to adapt their systems to integrate and support these new forms of digital assets. Market players specializing in open banking solutions can seize this opportunity by offering services that facilitate the seamless integration of CBDCs into the existing banking infrastructure, thus opening new avenues for the Open Banking Market during the forecast years.

Global Open Banking Market Challenge:

Data Security Threats Associated with Sharing of Financial Data Through APIs to Hamper the Market Potentiality – The global surge in digital transformation has resulted in a significant increase in online financial transactions and data processing. As the digital footprint expanded, the potential for security threats has grown. This heightened risk in the digital landscape has made financial institutions more cautious. Their apprehension is rooted in the fear of potential financial losses, reputational damage, and regulatory non-compliance associated with security breaches. Consequently, this cautious stance is impeding the acceptance of open banking practices by these institutions, thereby constraining the Open Banking Market potential.

Global Open Banking Market Trend:

Facelift of Onboarding Process Leading to Increased Adoption of Open Banking – The transformation of the onboarding process through open banking is emerging as a crucial trend in the global financial landscape. Financial institutions are strategically utilizing the open banking rule to simplify onboarding, alleviating customer stress by providing seamless access to user data and eliminating the need for manual input.

This shift not only improves efficiency but also enhances user-friendliness, effectively tackling the challenge of onboarding stress as banking app usage scales. Furthermore, open banking enables the automation of retrieving user details, including account information and transaction history, along with expediting onboarding, ensuring data accuracy. Consequently, the growing adoption of this system for onboarding is expected to see a significant increase, thus instigating the Open Banking Market size during the forthcoming period.

Global Open Banking Market (2024-30): Segmentation Analysis

The Global Open Banking Market study by MarkNtel Advisors evaluates & highlights the major trends and influencing factors in each segment & includes predictions for the period 2024–2030 at the global level. In accordance to the analysis, the market has been further classified as:

Based on Service:

• Retail Banking
  • Aggregation & Financial Management
  • Credit Risk Decisioning
  • Payments
  • Origination & Onboarding
  • Others
• Corporate Banking
  • Corporate Treasury
  • Financial Management
  • Credit Decisioning
  • Payments
  • Value Added Services
  • Others
• Capital Market
• Others

Payments, a segment under Corporate Banking & Retail Banking, is gaining momentum across the Open Banking Market, seizing a substantial share in the years to come. Though, they are relatively new, however, their rapid growth over the past year has been noticeable. A range of players backed by technology giants, like Google, Amazon, Facebook, Apple, etc., have come into the fray of financial services offering.

These tech-backed entities, often referred to as fintechs, are stepping into the world of financial services and offering quicker payment solutions. They excel at integrating cards, e-wallets, and other payment methods seamlessly. These innovative fintech companies are leveraging the concept of open banking to create solutions that simplify and streamline the payment processes for individuals & businesses. As a result, the adoption of this system for payment processes is witnessing a significant boost.

 Based on Deployment:

• On-premise
• Cloud
• Hybrid

Cloud-based deployment has showcased a steady growth rate by financial institutions across the globe. Cloud deployment offers scalability, flexibility, and cost-effectiveness, which has made it an attractive option for many financial institutions and other businesses. Moreover, cloud-based solutions enable financial institutions to quickly adapt to changing market demands, enhance collaboration, and efficiently manage resources.

In addition to this, hybrid deployment models are also gradually gaining popularity, as this model allows organizations to leverage the benefits of both on-premise and cloud environments, providing greater flexibility in managing sensitive data on-premise while utilizing the scalability of the cloud for other operations.

Global Open Banking Market (2024-30): Regional Projections

Geographically, the Global Open Banking Market expands across:

• North America
• South America
• Europe
• The Middle East & Africa
• Asia-Pacific

Europe has positioned itself as a frontrunner in the Global Open Banking Market propelled by key elements such as API standardization, diverse national standards, robust landscapes in non-retail payments, and the influential presence of mobile payment systems associations. The UK & France, in particular, stands out as a leader in API standardization, laying a strong foundation for Open Banking initiatives. This standardized approach facilitates seamless integration and interoperability, contributing to the overall success of Open Banking in the region.

On the other hand, countries like the Netherlands, Switzerland, Spain, etc., are showcasing outstanding performance in digital evolution. Of them, Spain appears to soar ahead in terms of actual digital engagement, having the highest number of “passported-in” third-party providers (TPPs) across the European Economic Area (EEA) and the UK. Hence, the adoption of this system has significantly surged, resulting in enhancing the Europe Open Banking Market outlook.

Global Open Banking Industry Recent Development:

• 2022: Tink AB revealed the extension of its open banking payment services to five additional markets across Europe. The company's Payment Initiation Services (PIS) product is now operational in the Netherlands, Norway, Estonia, Finland, and Lithuania.
• 2022: Worldline S.A. established a strategic commercial partnership with Neonomics to enhance its open banking services throughout Europe. Leveraging Neonomics, Worldline is set to broaden its coverage for account-to-account payments and data aggregation to include the Nordic region, encompassing Norway, Sweden, Denmark, and Finland.

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• Global Open Banking Market Report by MarkNtel Advisors provides a detailed & thorough analysis of market size & share, growth rate, competitive landscape, and key players. This comprehensive analysis helps businesses gain a holistic understanding of the market dynamics & make informed decisions.
• This report also highlights current market trends & future projections, allowing businesses to identify emerging opportunities & potential challenges. By understanding market forecasts, companies can align their strategies & stay ahead of the competition.
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