Adoption of Open Banking: 1,578 banking platforms and 5,564 APIs worldwide

Around the world, the adoption of open banking is steadily increasing, adopted by a growing number of banks and fintech companies to deliver innovative financial products and tap into new market segments.

A new report from Platformable, a Barcelona-based startup that creates data products and digital tools, examines the latest developments in the global open banking/open finance scene, exploring emerging trends and key drivers of sector growth.

According to the research, 2022 has so far been a successful year for the open banking industry. Among the key trends observed this year, the report notes that in the second quarter of 2022, the number of open banking platforms and available APIs continued to increase, indicating growing adoption by stakeholders. Banks, meanwhile, have sought new business models and opportunities, including banking-as-a-service (BaaS) offerings and partnership models, and fintech companies have continued to leverage banking APIs. to innovate and launch new products.

1,578 open banking platforms and 5,564 APIs worldwide

At the end of the second quarter of 2022, Platformable identified 1,578 banking platforms making APIs available, which represents an annual growth of 8%. Together, these banking platforms made 5,564 open banking API products available to third parties, up from 4,831 in Q1 2022.

Europe remains in the lead, accounting for 73.5% of open banking platforms globally (1,160) and 45.6% of open APIs available (2,537) at the end of Q2 2022.

Although Europe led in terms of absolute numbers, platforms and products, Asia-Pacific (APAC) saw the strongest platform growth, with open banking platforms growing by 44% in the second quarter of 2022 year-on-year (YoY) to reach 203, an increase that was largely driven by Australia, Hong Kong, Indonesia and the Philippines, according to the research.

Global open banking API platforms and their API products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Global open banking API platforms and their API products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Open banking regulation is progressing

As of the second quarter of 2022, 80 countries had implemented open banking regulations, while 75 were close to or in the process of implementing open banking rules.

Europe and the UK have moved towards an open financial framework. In Latin America, countries such as Brazil, Argentina and Chile have continued to define their national framework, provide greater clarity and interoperability rules, mandate account aggregation capabilities and introduce fintech laws.

In the Middle East and Africa, Bahrain released amendments to its open banking rulebook, and Nigeria released draft open banking guidelines. And in Asia-Pacific, India unveiled plans to share personal income data and open up e-government tools to interested parties around the world.

Current progress in open banking regulation worldwide Q2 2022, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Current progress in open banking regulation worldwide Q2 2022, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Diversification of API products

In Q2 2022, API revenue grew 15% year-on-year, with the strongest growth seen in Latin America (LatAm) (56%), North America (35%), UK (27 %) and Asia-Pacific (24%).

While most open banking APIs provided by financial institutions remain mandatory payments, accounts, and banking products, other non-mandatory APIs are growing rapidly, including know-your-customer (KYC) and identity, credit services and commerce, according to the research, indicating that banks are keen to expand their API offerings and embrace the trend.

Growth of API products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Growth of API products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Banks explore new business models

Banks are actively exploring new business models using APIs, including partner programs, paid premium APIs, seed funding and mentorship programs, and BaaS offerings, according to the research. Some, like the UK’s Starling Bank, Singapore’s DBS Bank and Brazil’s Banco do Brasil (BB), have gone further by taking an open ecosystem approach and offering marketplaces that include apps and third-party providers.

BB’s API program, for example, is split into two parts: BB’s open ecosystem and its Open Finance Brasil API offering which lists some third-party providers, and the bank’s own API portfolio of more of 20 APIs in partnership and BaaS models.

Deutsche Bank is betting big on integrated finance, providing a wide range of APIs and integrated finance options. The Deutsche Bank Developer Portal contains APIs for all banking industries, as well as sandbox and production environments.

Open banking drives fintech innovation

Beyond banks’ platforms and APIs, research found that open banking helps foster fintech innovation more broadly and grow national fintech ecosystems.

In the United States, 82% of fintech companies using the API are local, a proportion that rises to 70% in the United Kingdom (the lowest), which implies that open banking allows the emergence of a larger local fintech.

Platformable identified 2,854 API-enabled fintech products at the end of Q2 2022, and while payment solutions remain the dominant category, accounting for around a third of all API-enabled fintech solutions, other categories and sub-categories are emerging. also including account maintenance and budgeting applications, digital and open banking enablement solutions, private management solution, data, analytics and algorithms, and consumer loans and credit services.

Top 10 financial technologies using APIs by sub-category, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Top 10 financial technologies using APIs by sub-category, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

SMEs and individuals remain the main target markets

The research found that fintech solutions that use banking APIs primarily target SMEs and individuals, accounting for 59% and 40% of all open banking fintech products globally, and are fairly generic in nature.

This implies that there is a huge gap of opportunity to offer products that meet the specific needs of customer segments, including migrant workers, expatriates and freelancers, the report says.

Such products have nonetheless begun to emerge, he notes, citing examples such as the US Viva First, a digital banking app for the Latino community in the US; Smile, a credit reporting platform for the Filipino workforce; and Yonder, a UK provider of expat loyalty cards.

Main target market for fintech products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

Main target market for fintech products, Source: Open Banking/Open Finance Trends Q3 2022, Platformable

An opportunity to improve financial inclusion

New technologies, including open banking and open finance, are driving down the costs of doing business and enabling a wider range of users to access financial services, introducing opportunities to help improve financial inclusion .

In Brazil, open banking is expected to attract an additional 4.6 million people to the formal credit market for the first time, expand access to attractive borrowing rates and inject BRL 760 billion ($141 billion) in the economy, according to a recent study by Serasa Experian, a local credit research firm.

Platformable estimates that 54% of existing fintech products based on open banking/open finance APIs could be used to address financial inclusion, highlighting the potential of open banking to drive social and economic development.

Featured image credit: Rawpixels

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