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Open banking transactions to reach US$330 billion by 2027

Open banking is the use of open APIs for third-party developers to build applications and services around the financial institution. The third-party developers would normally be non-banking organizations that have an interest in offering financial services.

According to a 2020 McKinsey global survey on APIs in banking, roughly 75% of banking APIs are used for internal purposes, and banks plan to double the number of internal APIs within five years. Nearly 20% of banking APIs are used externally to support integration with business partners, including suppliers. Banks also have plans to double the number of these APIs by 2025.

Over the years, open banking services have become increasingly in demand with banks also offering them to organizations to stay relevant in the world of digital finance today. The rise of digital banks, for example, has seen open banking play an important role in supporting non-financial organizations to build their applications.

A new study from Juniper Research shows global open banking payments transactions values are expected to exceed US$330 billion globally by 2027. In 2023, the amount was predicted to be US$57 billion.

The Open Banking: Opportunities, Competitor Leaderboard & Market Forecasts 2023-2027 report predicts that the development of new use cases, such as bill payments via this method, will drive adoption, given the simplicity of use versus alternatives such as card payments.

In Southeast Asia, open banking is going beyond just getting data from banks. Non-financial organizations that are offering banking services are using information that is already available to them to offer more products and services. For example, Singapore Financial Data Exchange gives users assess to personal financial information from SGX Central Depository, participating banks, and government agencies as reported by Fintech News Singapore.

Interestingly, the research shows that education on open banking will catalyze its market growth. This included informing customers about the security and benefits from this method to alleviate common consumer fears and misconceptions regarding the potential misuse of financial data to which third parties are granted access.

“Open banking must overcome consumers’ security fears surrounding the sharing of financial data if it is to fulfill its strong growth potential. Accordingly, vendors must educate consumers, and provide greater transparency surrounding data privacy and security by highlighting the procedures in place to protect financial data to ease security concerns and encourage greater adoption of such services when marketing their solutions,” research author Jordan Rookes explained.

The research also predicts the development of new use cases will be instrumental in ensuring that open banking fulfills its potential. One of the most promising new use cases is the ability to use open banking payments to pay tax bills, introduced in the UK. As bill payments using this method expand outside of the UK, they are expected to account for more than US$59 billion globally in transaction values by 2027.

Vendors in this space must continue to invest in new high-potential use cases, such as full integration within e-commerce marketplaces. This will help both further develop the market and attract a more sizeable user base, becoming more competitive in an increasingly saturated digital payments market.