Europe is often seen as a pioneer in the widespread adoption of open banking, but despite groundbreaking regulations like PSD2, there are significant differences and discrepancies between the countries of the continent, according to a new study by the German open banking platform Ndgit.
In a whitepaper called Open Banking APIs Worldwide, Ndgit offers a country-specific guide to open banking and a country ranking based on five key factors: dissemination of open APIs, regulatory requirements, standardization initiatives, and the existence of a Central Regulatory Authority for Third Party Providers (TPP).
Europe is a leader in open banking legislation
The paper ranks the European Union (EU), the European Economic Area (EEA) and the United Kingdom at the top of the list and recognizes the PSD2 legislation governing electronic payment services in the EU and EEA and the Open Banking Regulatory Initiative in the UK, forcing the country’s largest banks to open up their data, as key drivers for the implementation of open banking.
These formal, mandatory open banking systems have accelerated the adoption of open APIs. Although PSD2 does not provide an API standard or framework in the EU, the industry quickly adopted common standards. Today, the Berlin Group’s NextGenPSD2 is the most widely used standard and covers 78% of all European banks. This is followed by UK Open Banking and STET in France.
In the UK, the Competition and Markets Authority (CMA) commissioned the country’s nine largest banks in 2018 to provide standardized open APIs to give licensed startups direct access to their data. Since then, 327 regulated providers have joined the UK open banking ecosystem, including 234 TTPs and 93 account providers, 114 of which have live offers in the market.
By early 2021, more than 3 million UK consumers and businesses had used open banking enabled products to manage their finances, access loans and make payments.
Germany, Spain and Scandinavia as leading open banking innovators
According to the Ndgit report, several countries stand out within the EU and the EEA, with Germany, Spain and the Nordic countries being particularly innovative in the area of open banking.
The Nordic countries Sweden, Denmark and Norway have one of the most advanced open banking ecosystems thanks to highly developed digital infrastructures and a pan-Nordic approach to cooperation.
To date, the Nordic countries are the only countries in Europe where established digital ID authentication and know-your-customer services (KYC) on a pan-Nordic level are part of the open banking strategy. In addition, the region is also a leader in digital payment services, particularly with the P27 initiative, which aims to develop a real-time cross-border payments infrastructure.
Germany was the first country to provide interfaces and APIs for account access and has been offering FinTS, a bank-independent protocol for online banking, since the late 1990s. The Berlin Group’s NextGenPSD2 is based on experience with the FinTS standard for account access and payment initiation services.
In Spain, the industry uses the Berlin group standard, but Redsys has launched its own hub, which now serves more than 25 banking groups. The Redsys API gateway extends the API functionality beyond the scope of PSD2 to include savings products, loans and real estate financing, for example.
Alongside these countries, hubs have emerged in countries like Portugal, Luxembourg and Italy that centralize the delivery of APIs through a single provider, making integration much easier for fintech companies, the report said.
In 2018 Consorzio CBI, the think tank for innovations for the payments market sponsored by the Italian Bankers Association, launched the CBI Globe (Global Open Banking Ecosystem). In Portugal, SIBS launched the country’s first open API platform in 2019, providing access to 95% of all domestic bank accounts.
Switzerland: a “climber” in open banking
Switzerland, although legendary for its banking landscape, was classified as a “climber” in open banking due to the lack of legislation on opening up bank data.
Therefore, open APIs and API standard initiatives in Switzerland were driven exclusively by the market, often led by market bodies and stakeholders. Examples are the industry group Swiss Fintech Innovations (SFTI), which has worked with the system providers Avaloq, Finnova, Temenos, Finstar and Ndgit on the Common API; the OpenBankingProject.ch, which is developing an open API for Swiss payments; and the b.Link platform launched in May 2020 by the Swiss stock exchange operator SIX, which provides financial institutions and service providers with a platform for standardized interfaces.
According to Ndgit, the regional bank Hypothekarbank Lenzburg is currently the only market participant to offer Open Banking APIs in Switzerland via a developer portal. The ecosystem enables multidimensional business models with the Ndgit API platform, which enables startups like Neon to offer services directly to their customers. At the same time, the bank customers of Hypothekarbank Lenzburg can benefit from a range of fintech startups that are part of the ecosystem. Like PSD2, these APIs support account information and payment initiation, but also take local Swiss peculiarities into account.