Open banking use to increase 470% in next four years, driven from Europe

The number of requests made to open banking application programming interfaces (APIs) will reach 580 billion globally by 2027, 470% more than what is expected this year, with European consumers and businesses driving the growth.

According to the numbers from Juniper Research, 70% of these requests will be in Europe, which has the most established API connections and open banking regulations.

Juniper said today, particularly in Europe, open banking is covering more services than ever before, including credit cards and mortgages.

Research co-author Nick Maynard explained: “Europe has led the way on open banking and is an example of how regulator-led approaches can stimulate innovation. As a well-established market, Europe’s growth rate will dip compared to others, but it will still serve as an innovation hub for open banking development.” 

In 2018, UK banks were required to implement the Competition and Markets Authority (CMA) open banking regulations, which led to the development of APIs in banking to give consumers more control over their accounts.

The end goal was to increase competition in a sector dominated by big financial services companies. Customer banking data is shared by the industry through APIs, with customer permission, enabling businesses to offer tailored products.

It all started with the EU’s Payment Services Directive 2 (PSD2), which came into force in 2017.

Recent research found that seven million people in the UK used open banking last year. According to the figures, reported to Open Banking Limited (OBL) by the nine banks and building societies that had to implement open banking functionality, two million users have been added since this time last year.

While open banking has seen gradual take-up and the development of a new sector of fintech, open finance as the next phase of open banking will go much further. Open finance will see firms share data across more services, such as mortgages and loans, also via APIs, and offer products and services from external organisations.

A survey of about 800 manager-level executives at finance firms, by IT financial services software supplier Finastra, found that 85% believe open finance is already having a positive effect and making the finance sector more collaborative. Most (80%) believe the sector is open to collaboration.

The appetite to develop open banking software in the financial services sector has added focus and resources to open banking in Europe.

For example, the acquisition of Danish fintech Aiia by Mastercard in 2021 was a sign that open banking is entering a new phase.

The takeover of Aiia – previously the Nordic API Gateway – for an undisclosed sum came hot on the heels of Visa’s €1.8bn acquisition of Sweden’s open banking fintech, Tink, in June that year. Both fintechs are now part of huge global financial services organisations with opportunities to integrate open banking technology into every corner of consumer and business financial activity.

The acquisition gave Aiia – like Tink after the Visa takeover – the resources to take a concept, often shrouded in mystery for consumers and many businesses, to new levels.