SAN MATEO, California, June 15, 2021 – As financial service providers look toward the future, they have a positive outlook on the benefits of open banking. But they agree that there needs to be more regulation put in place, and they also see data security and privacy as the biggest challenges to embracing open banking, according to Envestnet | Yodlee’s State of Open Banking Research. Envestnet | Yodlee surveyed over 200 decision makers from U.S. banks, wealth management, and FinTech firms on their expectations regarding open banking in the near-term and long-term.
92% of those surveyed agree that consumers are the ultimate beneficiary of open banking. When asked who would benefit the most aside from consumers, the majority of bank and FinTech leaders felt that their own financial services sector would be the primary beneficiary. Over half of FinTech leaders (54%) felt that they would benefit the most, and over half of bank leaders (57%) felt that the combination of global, national and regional/community banks would benefit the most. While, a quarter (25%) of wealth management leaders think open banking will benefit them.
When asked how important is the advancement of open banking with regard to the following factors, respondents found all of these factors very to extremely important:
- Generate new business models/revenue opportunities: 83%
- Strengthen their relationship with customers: 81%
- Stay competitive against disruptors: 78%
- Fuel customer acquisition: 78%
- Expand access to underserved or new target customers: 76%
- Improve customers’ financial well-being: 73%
“Ultimately open banking is about empowering choice for the achievement of positive financial outcomes for consumers, and also for innovators to safely engage in the financial ecosystem. Banks and wealth management firms will be able to build and leverage a greater array of solutions to better service their customers’ needs with confidence and less risk,” says Chad A. Wiechers, Senior Vice President of Data Acquisition and Management, Envestnet | Yodlee.
The open banking opportunity
Virtually all (99%) of the leaders surveyed believe that open banking provides an opportunity for their organization to leverage, with 59% seeing that opportunity as having a potentially high impact. And because of that, 66% of financial service providers have already launched or have plans in the works to launch open banking initiatives within the next 18 months. Additionally, 56% of the total respondents have or expect to phase out screen scraping within the next 18 months.
While only 21% of all respondents see open banking as having a significant impact on their business in the next 12 months, that level jumps to 59% in the next 5 years. As a group, 70% of FinTech leaders are expecting at least a significant impact by then.
Where they see opportunity, they see risk
With that opportunity as a backdrop for open banking, the leaders are also mindful of associated risk, with 83% seeing either moderate or high risk from introducing open banking. And FinTechs are the most concerned, with 33% seeing high risk while only 21% of banks feel that way. Interestingly, 81% of all respondents believe that consumer financial data access and sharing could benefit from greater regulatory certainty.
When asked what the biggest challenges are in adopting an open banking strategy at your organization, data security (48%) and privacy (39%) were identified as the top two. Importantly, only 8% felt that a lack of openness to partnerships was a challenge, meaning 92% are seemingly open minded to partnerships.
“We can all agree that the consumer will be the big winner when it comes to the adoption of open banking,” says Wiechers. “The broader data supports what we are already seeing in the market, banks are open to partnerships to enable trusted consumer permissioned access to data for their consumers to share their financial information with the financial app of their choice as they seek to ultimately improve their financial wellness.”
About the Survey
This research was presented by American Banker and conducted by its parent company Arizent during March and April 2021 among 207 management level decision makers at banks ($5B+ in assets), wealth managers ($100M+ AUM) and fintech firms (of varying sizes). Respondents were screened for knowledge of open banking. This was a blind collection effort. Envestnet | Yodlee was not identified as the sponsor of the research.
Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone. Over 106,000 advisors and more than 5,200 companies including: 17 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.
About Arizent Research
Arizent delivers actionable insights through full-service research solutions that taps into its
first-party data, industry SMEs, and highly engaged communities across banking, payments, mortgage, insurance, municipal finance, accounting, HR/employee benefits and wealth management. Arizent has leading brands in financial services including American Banker, The Bond Buyer, PaymentsSource, Financial Planning, National Mortgage News, and in professional services, such as Accounting Today, Employee Benefits News, and Digital Insurance. For more information, please visit www.arizent.com.