Banks Must Adapt to an Evolving Open Banking Landscape

Open banking’s growth is reshaping the financial landscape, with regulated third-party providers (TPPs) expanding their services internationally. Konsentus, an open finance ecosystem creator, has highlighted which countries are leading this expansion, as outlined in The Fintech Times.

Since September 2019, Konsentus has tracked the number of regulated open banking TPPs in the European Economic Area (EEA). For the first time, over half of these TPPs now have the necessary permissions to operate outside their home-regulated markets.

In September 2019, only 34% of EEA TPPs could extend their services to other EEA markets. By March 2024, this figure increased to 52%, marking a 53% rise. Similarly, the percentage of EEA TPPs authorized to initiate payments on behalf of account holders grew from 52% in 2019 to 66% in 2024, encompassing 241 of the 367 total EEA TPPs.

Konsentus’ data shows there are 367 regulated TPPs in the EEA. Germany leads with the highest number of domestic TPPs at 37, while Italy has the most non-domestic TPPs, totaling 149.

The expansion of cross-border transactions and the increasing authorization of fintechs to initiate open banking payments introduce additional security risks for banks. An EBA Opinion Paper from April 29, 2024, indicates that «cross-border fraud rates in volume are about nine times higher than for domestic transactions» for both cards and credit transfers. Consequently, banks must enhance their security measures to protect account data and funds as the ecosystem transitions to open finance.

Mike Woods, CEO of Konsentus, emphasized the need for banks to adapt: «In the early years of PSD2, fintechs focused on building APIs and connecting to banks. They are now monetizing their services and earning revenue. Our data shows significant long-term growth, and banks must ensure they are prepared to safeguard their customers’ data and funds in this evolving landscape.»