Open Banking

Open Banking plays an essential role in the modernization of payments, powering innovation in Account-to-Account transactions.

Whether you’re looking for value propositions, integration with fintechs or regulatory compliance, RedCompass Labs can help. We’ve been supporting and implementing Open Banking initiatives since day one.

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What is Open Banking?

Open Banking is integral to the next generation of financial services. With the customer’s consent, fintechs and third-party providers (TPPs) can access that person’s banking data, initiate payments, and provide other value-added services for the bank’s client via APIs.

With access to customer data from around the world, banks and fintechs will find it easier and faster to not only complete transactions, but innovate collaboratively, and offer customers greater freedom and choice over how they manage their finances. In short, Open Banking will democratize global payments infrastructure and level the playing field for all parties.

$57 Billion

Total value of transactions processed through open banking worldwide in 2023.

+50%

YOY worldwide customer growth – an estimated 132 million customers already utilise open banking.

+10x

Estimated increase in open banking transaction value – up to $580 billion – by 2027.

Open Banking Benefits

Integration between banks, fintechs, and PSPs via Open Banking is a key first step towards frictionless interoperable instant payments. New payments and data-based services will transform the business of payments. The winners will be those who can integrate, provide security and build collaborative ecosystems before their rivals to attract and retain the very deposits that banking is built off.

Empowering Financial Technology

With access to a global wealth of data, fintechs can introduce new tailored products, more robust and streamlined platforms, and a greater range of personalised experiences.

New products and services

Integrating with third-party applications enhances operational capacity and speed, enabling new product launches and better customer outcomes.

Higher Customer Satisfaction

As the full potential of Open Banking becomes apparent, your customers will start to benefit from new and highly-tailored services. Think: access to frictionless interoperable payments that travel from A2A to wallets, merchants, suppliers, vendors, and friends.

Harness the Power of Data

Open Banking will enable faster and more accurate decision making in every field, from operations to marketing, product development to customer services.

Instant Payments Payments Interoperability

How Does it Work?

Open banking involves the democratization and interoperability of APIs allowing service providers to access customer data, initiate payments and provide new services. But reaching the point of true open banking will require several steps.

Standardisation of APIs

For banks and fintechs to communicate effectively, they must ensure their APIs are consistent and interoperable. This will mean adhering to market and regulatory standards.

Regulatory Compliance

As banks start to operate globally, they must also become aware of, and compliant with regulations worldwide. Customers must opt-in to have their data shared, and that data must be transferred securely, transparently and in line with consumer protection laws.

Data Protection

Data must be protected from malicious third-parties. Customers should expect increased Strong Customer Authentication (SCA) and new forms of Multi-Factor Authentication (MFA) to verify their identities. This will ensure the data they are sharing and payments they are initiating legitimate. Meanwhile, banks and fintechs must ensure data is encrypted and stored in line with both national and international legal requirements.

Infrastructure Upgrades

After ensuring APIs are standardised and secure, banks must then ensure their infrastructure is capable of adapting to open banking. This will mean the implementation of middleware to facilitate data exchanges and handle API requests. These systems must be robust, remembering the pressure that instant payments will place on traffic.

Image of people crossing a busy street in Europe

The scale of the opportunity

With open banking, institutions will be able to create a customer-centric model for financial services worldwide. With more personalised experiences, a greater range of products and services, and faster, more secure services, open banking will change the way we bank for good.

At the same time, banks will experience a new era of competition. With innovation coming thicker and faster, the race will be on to create the best products and services – again, with the customer as the key beneficiary.

Make no mistake, open banking presents one of the greatest opportunities in the history of finance. But capitalising on these opportunities will require your organisation to move with boldness and agility.

By 2030

Open banking market is expected to reach $135 billion worldwide, growing at a CAGR of 27.4% between 2024 and 2030.

Key challenges for banks

Adapting to open banking requires much more than implementing new APIs. To take advantage of the opportunities of open banking, banks must develop a fully interoperable platform, navigating the complexities of a new regulatory space and upgrading legacy systems along the way – all while ensuring a continuous service.

Technological Integrations

Adapting to open banking is one step in the development of a fully interoperable system. However, with many banks still operating on legacy systems, upgrading, replacing and maintaining infrastructure may prove costly and complex.

Regulatory Compliance

As well as introducing banks to new territories, open banking will reshape the global regulatory space. Banks must be prepared to adapt, and adhere to new regulatory environments, ensuring their systems are flexible to adapt to changing compliance frameworks in the future.

Fraud Prevention & Cybersecurity

A new renaissance of data sharing between banks and third parties also raises the risk of fraud and data theft. Banks must ensure that their systems and APIs are secure and compliant, implementing measures such as encryption, tokenisation and multi-factor authentication, while staying compliant with international and local data protection laws.

Business Transformation

Open banking will change the way we bank forever. As well as implementing the technology, your organisation must be prepared for radical operational change. From managing new relationships with third parties, to training staff to manage an open banking platform, the process will be long and complex.

How can we help?

For over 20 years, RedCompass Labs has helped banks in over 20 countries to manage enterprise-scale transformation. With over 140 people, including world-leading technical experts, we have the expertise and the experience to help your organisation adapt to an interoperable future.

Global payments experts