Most U.S. Banks Consider Open Banking a ‘Must Have’

Finastra research revealed views on open banking in the United States have matured over the last year, with 68% of respondents considering it either a ‘must have’ or ‘important’, up from 48% last year. Of those who have integrated open banking, 100% say there has been a significant impact to their organization.

The ‘Financial Services: State of the Nation Survey 2022‘ found that as more financial institutions understand the business value of open banking and the broader context of open finance, many are now moving into a second phase – focusing on shared data and infrastructure. With 56% of U.S. respondents (up from 45%) saying that open finance is now a ‘must have’, this suggests that the sector is actively reviewing products and services that would benefit from an ecosystem model.

Although the financial services industry is currently seeing increased constraints and hesitation around investing in technology, the data shows that 82% of US respondents believe that shared data and infrastructure will become a key part of the strategy for the move to open banking and finance, emphasizing the steady appetite financial institutions still have in this area.

The research was conducted amongst 758 professionals at financial institutions and banks from Aug. to September 2022 across France, Germany, Hong Kong, Singapore, the UAE, the UK and the U.S. It explores the open banking and finance landscape, the technology and initiatives set to make an impact in financial services over the next year and the growing importance of ESG.

Other insights include:

• Banking as a Service (BaaS) and Embedded Financehave become an industry norm – 86% of U.S. institutions agree that BaaS and embedded finance is already expected/demanded by customers. Almost half (46%) of institutions surveyed have improved or deployed BaaS in the past year. More than a third (35%) have deployed or improved embedded finance.

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• Most financial services firms are now using cloud-based solutions – half of global respondents (51%) have most or all their software stacks on cloud-based solutions, with a further third (32%) splitting equally between on cloud and on-premises solutions. The U.S. is further along, with 59% of respondents having most or all of their software hosted on cloud-based solutions.

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• Global financial institutions are being prudent with their technology investments– with 82% noting constraints caused by the current economic situation. Despite the current economic uncertainty and wider cost pressures, the majority (74%) forecast that they will have resumed their full investments by the end of Q1/23.

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• Support for ESG is widespread – There is widespread agreement amongst financial services organizations that ESG is important for the sector, with more than 4 in 5 (84%) saying they strongly agree or slightly agree with this notion. Support for the notion of a duty to the communities that institutions serve has increased in the U.S. (89% in 2022; 84% in 2021).

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“Finastra has always championed open finance as the key to unlocking the potential of people, businesses and communities everywhere,” Simon Paris, CEO at Finastra, said. “Over the years that we have conducted this survey, we have seen open finance grow from an emerging idea to a clear priority for institutions across the world, enabling, as it does, business model shifts such as embedded banking, as well as financial inclusion and equality.”