Open Banking Market Analysis

Open Banking Market Analysis

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Based on financial services, the market is divided into banking & capital markets, payments, digital currencies, and value-added services. In 2023, the banking & capital markets accounted for a market share of over 40%. The integration of open banking into the banking and capital markets is reshaping the financial landscape by enhancing data accessibility, streamlining operations, and fostering innovations. The open banking market in the banking sector is driven by the adoption of API-based platforms, allowing for greater data sharing and transparency. By leveraging APIs, banks can offer more personalized & efficient services, improving areas such as loan processing, wealth management, and risk assessment.
 

The adoption of open banking standards in capital markets operations offers greater transparency and efficiency. This is particularly relevant for processes such as customer onboarding, Know Your Customer (KYC) procedures, and transaction processing, which can experience up to 40% reduction in time & costs using open banking APIs. In March 2024, Plaid Partnered with Bank of America to expand its financial management tools. The collaboration allows Bank of America customers to connect their accounts with a wider range of financial management tools through Plaid's open banking platform. This demonstrates the ongoing integration of open banking with the existing banking services for enhanced personal financial management.
 

Based on deployment model, the market is categorized into on-premise, cloud, and hybrid. The cloud is expected to hold over USD 82.1 billion by 2032. Cloud deployment models enable financial institutions to efficiently manage large volumes of data, integrate with third-party applications, and innovate rapidly in response to changing market demands. Cloud platforms allow banks and TPPs to easily adjust their infrastructure based on the changing data volumes and user traffic. In addition, cloud solutions eliminate the need for upfront investments in hardware and software infrastructure.
 

Further, cloud-based open banking platforms facilitate easier collaborations between banks and TPPs. They provide a centralized platform for data sharing and application development, streamlining the overall process. In May 2024, Mambu, a leading cloud-native core banking platform provider, announced a partnership with Yapily, an open banking platform. This collaboration aims to simplify open banking integration for Mambu's banking customers, leveraging the scalability and ease-of-use of cloud solutions. The cloud infrastructure adapts to changing data volumes and user needs. It enables rapid development & deployment of open banking solutions.
 

In 2023, North America had a significant share in the open banking market accounting for over 31% share. The U.S. and Canada are home to numerous fintech companies which are driving the adoption of open banking. Innovations in mobile banking apps, digital wallets, and financial management tools are prevalent in this region. In addition, regulatory bodies in the region are beginning to embrace open banking. The Consumer Financial Protection Bureau (CFPB) website offers resources and consumer insights related to open banking in the U.S., focusing on consumer protection in financial services. Financial institutions are increasingly collaborating with fintech companies to offer enhanced services. In March 2024, Finicity, a Mastercard company, announced collaborations with several North American banks to develop new open banking solutions. The collaboration aims to create secure and user-friendly financial services that leverage open banking data. It focuses on developing tools for better financial management and decision-making.
 

In European countries such as the UK, Germany, France, and Spain, the open banking market is driven by strong regulatory frameworks such as the PSD2, widespread fintech adoption, and consumer demand for innovative financial services. The PSD2 has been instrumental in promoting open banking in Europe. It requires banks to open their payment services and customer data to third-party providers, fostering a competitive & innovative financial ecosystem. In June 2023, the European Commission proposed a comprehensive Open Finance Regulation, which aims to extend open banking principles to other financial sectors such as insurance, pensions, and investments. This regulation is designed to promote data sharing across financial services, enhance competition, and improve consumer access to financial products.
 

In APAC countries, including India, Japan, China, Indonesia, and Australia, open banking growth is driven by a combination of regulatory initiatives, technological advancements, and increasing consumer adoption of digital financial services. Consumers in APAC are keen on using innovative financial products that offer convenience and personalization. Advanced API integrations and the proliferation of fintech startups have also been pivotal in driving the market growth. In September 2023, the Indian government announced plans to expand the scope of UPI to include more financial services. It enables seamless real-time payments and financial data sharing, boosting the open banking ecosystem in the country.