Open Banking Market

Open Banking Market Size:

The global open banking market size reached US$ 25.6 Billion in 2023. Looking forward, IMARC Group expects the market to reach US$ 113.3 Billion by 2032, exhibiting a growth rate (CAGR) of 17.46% during 2024-2032. The market is primarily driven by rising fintech investment, regulatory initiatives promoting financial data sharing, the escalating customer demand for customized banking services, and a rapid shift to digital banking that calls for more transparency and collaboration between banks and third parties needed to promote innovation and offer customer-centric financial solutions.

Open Banking Market Analysis:

• Major Market Drivers: The open banking market growth is primarily driven by regulatory policies such as PSD2 in Europe, that are favorable to data sharing processes between financial institutions. Along with this is the consumers' demand for ease and immediate data access, which is also the driving force in this industry. In addition, the technological advances in API integration contribute to a secure data exchange and boost the connection between banks and FinTech companies, which has led to the delivering of new innovative services, thereby stimulating the market growth.
• Key Market Trends: Open banking market trends include the integration of AI and machine learning to help in individualized financial advice as a growth factor to clients’ experiences. The rapid adoption of the Blockchain for secure data sharing, while banks can exploit the open APIs to accelerate the diversification of their service offerings, inter alia, payments, and lending is fueling market growth.
• Geographical Trends: Europe dominates the market through regulations like Payment Services Directive 2 (PSD2), which are mandatory for the banks and third party providers. This rulemaking has paved the way for invention and competition mainly between banks and FinTech companies, which has pushed them to build digital platforms and partner with FinTech players. The area has been transformed into a hot spot for Open Banking services, which has led to a number of startups coming up and old banks creating new products.
• Competitive Landscape: Some of the major market players in the open banking industry include Banco Bilbao Vizcaya Argentaria S.A., Clarity Group Inc., Credit Agricole (SAS Rue La Boétie), Finastra (Misys International Limited), Finleap connect, Jack Henry & Associates Inc, Mambu, NCR Corporation, Nordigen Solution, Revolut Ltd, Riskonnect Inc., Societe Generale, among many others.
• Challenges and Opportunities: The open banking market faces challenges such as the difficulty of integrating different systems, regulatory variances, and complexity. It also offers opportunities in the development of highly advanced security solutions, the emergence of new BaaS platforms, and the adoption of global interoperability standards will be enriched by an integrated financial network.

Open Banking Market Trends:

Rising Regulatory Support:

The open banking market growth is significantly driven by the regulations such as the European Union PSD2 and the UK Open Banking, which require banks to provide application programming interfaces (APIs) to third parties. These guidelines would help to nurture competition and stimulate innovation and transparency in the banking industry. For instance, The Open Banking Implementation Entity (OBIE) stated in a report by the end of 2021 that over 3 million users who were either businesses or individuals have used the Open Banking service, which further displayed the positive impact of regulators in fueling their usage. This regulatory framework indeed promotes the financial industry and the services innovation, besides facilitating the delivery of better financial goods, increased security, and quality consumer services that ask for more consumer trust and more engagement with open banking platforms.

Ongoing Technological Advancements:

The open banking market recent developments are mainly driven by the advancements of enough API technologies, which have enabled the banks and the third parties to exchange the customer’s financial data in a secure manner. For instance, the EC has emphasized that the European Union was home to over 9,000 FinTech startups using these technologies by the end of 2022. This thriving and dynamic financial sector ecosystem is characterized by the active work of thousands of FinTech companies. Along with making processing and operation tasks much easier, this innovation also ensures strong security measures, which are of the essence to gain credibility and trust from financial institutions and consumers. Hence, the successful and expanded implementation of the modern APIs frameworks remains the main factor in facilitating the growth of the whole financial system, allowing for more personalized and optimized services.

Rising Consumer Demand for Personalization:

In the present time in which the customers get home delivered with the service customized to individual needs, open banking is in the front line of the financial sector companies with which it is the solution to the problem. As per the reports from the European Central Bank, more than 60% of the consumers want personalized financial services demonstrates this inclination. The Open Banking system leverages on enhanced capabilities by giving market players the freedom to create innovative and advanced tools such as personalized money management solutions, better borrowing conditions, and competitive investment options. The tendency to lean toward personalization in the form of customer satisfaction and retention simultaneously motivates the financial industry players to innovate as providers demand more relevant and targeted solutions commonly referred to as individualization.

Open Banking Market Segmentation:

IMARC Group provides an analysis of the key trends in each segment of the market, along with forecasts at the global, regional, and country levels for 2024-2032. Our report has categorized the market based on services, deployment, and distribution channel.

Breakup by Services:

• Banking and Capital Markets
• Payments
• Digital Currencies
• Value Added Services
   

Banking and capital markets accounts for the majority of the market share

The report has provided a detailed breakup and analysis of the market based on the services. This includes banking and capital markets, payments, digital currencies, and value added services. According to the report, banking and capital markets represented the largest segment.

Banking and capital markets are driven by various factors leading under the influence of customer preference cards, technology development and government regulation. Governments regulations e.g. PSD2 in Europe or open banking initiatives all over the world drive competition and innovation. Government resources regard the fact that the open banking implementations market is growing quickly and showing rapid expansions. For instance, as per the Competition and Markets Authority (CMA) report, open banking in the UK could worth customers up to £7.2 billion by 2022. They come about through deepened cooperation between established banks and fintech start-ups, resulting in better services, customers satisfaction and expanded financial inclusion.

Breakup by Deployment:

• Cloud-based
• On-premises
   

On-premises holds the largest share of the industry

A detailed breakup and analysis of the market based on the deployment have also been provided in the report. This includes cloud-based and on-premises. According to the report, on-premises accounted for the largest market share.

In the open banking arena, the on-premises field is regulated by financial institutions' preference for security, control and compliance. Financial institutions who deal with sensitive data, especially in jurisdictions with strong regulatory policies, sometimes prefer on-premises solutions to manage their IT infrastructure and data security because they need to have the highest level of control over their environments. With this tendency comes the obligation to keep up with national and international requirements like GDPR in Europe, which introduce hefty fines as a response to data leakage. As per EBA expertise, financial service providers that are security focused often choose the in-house approach of data processing because this provides them with the highest possible data safety and customization capabilities and a tighter control over the delicate aspects of finance operations which are paramount for these organizations.

Breakup by Distribution Channel:

• Bank Channels
• App Markets
• Distributors
• Aggregators
   

App markets represents the leading market segment 

The report has provided a detailed breakup and analysis of the market based on the distribution channel. This includes bank channels, app markets, distributors, and aggregators. According to the report, app markets represented the largest segment.

In open banking, the number of mobile banking apps that are gaining popularity is mainly driven by dual factors of increasing consumer quest for convenience and personalization in financial services as well as by competitive, innovation favorable regulatory frameworks. By the end of 2021, as per the UK’s 2021 Competition and Markets Authority’s findings, the uptake had heightened, with about 2 million log ins reported daily, twice as much as the previous year’s figures. The flood of this character comes mostly from regulatory measures, such as PSD2 and open banking standards of Europe and UK, respectively, which demand safe sharing of data and interoperable systems among banks and third-party apps This regulation establishes an ecosystem where developers can design novel financial applications that could, for instance, range from simple budgeting tools to comprehensive financial management systems, thus driving the rapid expansion of app markets open to innovation under the open banking scheme.

Breakup by Region:

• North America
  • United States
  • Canada
• Asia-Pacific
  • China
  • Japan
  • India
  • South Korea
  • Australia
  • Indonesia
  • Others
• Europe
  • Germany
  • France
  • United Kingdom
  • Italy
  • Spain
  • Russia
  • Others
• Latin America
  • Brazil
  • Mexico
  • Others
• Middle East and Africa
   

Europe leads the market, accounting for the largest open banking market share

The report has also provided a comprehensive analysis of all the major regional markets, which include North America (the United States and Canada); Europe (Germany, France, the United Kingdom, Italy, Spain, Russia, and others); Asia Pacific (China, Japan, India, South Korea, Australia, Indonesia, and others); Latin America (Brazil, Mexico, and others); and the Middle East and Africa. According to the report, Europe represents the largest regional market for open banking.

In Europe, the open banking market revenue is primarily driven by strong supervisory frameworks such as the PSD2 (Payment Services Directive 2), that require banks to open their data to third parties with customer consent. This regulation is meant to raise the level of competition and innovation in the financial services industry. According to the European Banking Authority in 2021, there were almost 2500 of third-party providers registered under PSD2, which indicates considerable growth and interest in Open Banking services that PSD2 facilitates. The increase in the number of registered independent providers and the significant number of consumers who have implemented these directives clearly demonstrate the impact of this policy. Moreover, the active role of Europe’s regulation of data and privacy with GDPR mirrors such projects ensuring secure and trusted data sharing which is essential for consumer confidence in the new financial services.

Competitive Landscape:

• The market research report has also provided a comprehensive analysis of the competitive landscape in the market. Detailed profiles of all major companies have also been provided. Some of the major market players in the open banking industry include Banco Bilbao Vizcaya Argentaria S.A., Clarity Group Inc., Credit Agricole (SAS Rue La Boétie), Finastra (Misys International Limited), Finleap connect, Jack Henry & Associates Inc, Mambu, NCR Corporation, Nordigen Solution, Revolut Ltd, Riskonnect Inc. and Societe Generale.
  
  (Please note that this is only a partial list of the key players, and the complete list is provided in the report.)
   
• The open banking market key players are utilizing technology together with partnerships to bring innovation and improve the client's experience. According to government data, these players are concentrating on growing their API ecosystems to enable safe data sharing, and to enrich the development of new financial products and services. For instance, in the UK the CMA (Competition and Markets Authority) states that the number of open banking API calls exceeded 1 billion in 2023, showing the growing popularity of open banking services. The largest banks and financial tech startups are investing greatly in the API infrastructure and dev support to get ahead of the open banking competition that offers more personalized and efficient financial solutions to customers.

Open Banking Market News:

• In July2023, Fintonic launched OpenInsights (a platform with open banking data analytics) which is an open banking data analytics product. Fintonic is a company that specializes in solutions that can be tailored to the needs of enterprises and financial institutions. Its key products include user-friendly open banking services and data analytics solutions. With the OpenInsights offering, organizations will have access to a full range of proven tools & methods to gain fresh intelligence from open banking data, enabling them to base their decision on facts, improve the customer experience, and open up new opportunities for the financial sector.
• In October 2022, GoCardless, the open banking provider, signed a strategic partnership with Crowdz, an SME financing platform with futuristic open banking technology integration. This partnership hence allows UK, US and EU payments to cross the border instantaneously with the Open Banking's infrastructure in support. The system is designed with such features; verified mandates to avoid fraud and pay tom for instant payment and the verification of accounts is integrated for security and ease in financial transactions of SMEs. Partnership between GoCardless and Crowdz can be considered as an innovation that results in the use of open banking middleware to reduce the number of steps needed and increase speed, convenience and reliability for business operations around different regions.

Open Banking Market Report Scope:

Key Benefits for Stakeholders:

• IMARC’s industry report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the open banking market from 2018-2032.
• The research report provides the latest information on the market drivers, challenges, and opportunities in the global open banking market.
• The study maps the leading, as well as the fastest-growing, regional markets. It further enables stakeholders to identify the key country-level markets within each region.
• Porter's five forces analysis assists stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the open banking industry and its attractiveness.
• The competitive landscape allows stakeholders to understand their competitive environment and provides insight into the current positions of key players in the market.