Open banking represents a significant shift in the way financial services are delivered and consumed, according to a new report ‘Unlocking Financial Innovation’ published by Fintech & Payments Association of Ireland (FPAI), ahead of FintechNation in September, Ireland’s leading financial technology conference. However, a number of improvements will be needed to optimise its potential in Ireland which will require public-private collaboration.
Open banking involves the secure and seamless sharing of customer financial data between different financial institutions and third-party providers to enable customers to consolidate how they manage and move their money. Examples include the use of budgeting tools, banking apps and payment apps such as PayPal. The FPAI report, produced as part of a series of government IFS 2025 strategy papers, examines the opportunities for open banking in Ireland, identifies implementation challenges and examines regulatory and industry initiatives that are enabling an enhanced open banking market. It also outlines a number of key strategic recommendations for consideration in the revised National Payments Strategy (NPS).
Ireland in prime position for fintechs to establish, test and scale open banking across Europe
Speaking on the potential for open banking in Ireland, Michael Concannon, Head of FPAI Strategy & Development said: “Open banking is paving the way for innovations that are redefining how consumers and businesses interact with financial institutions. As a small, open economy, Ireland is in prime position for fintechs to establish, test and scale open banking across Europe particularly given our thriving fintech and international financial sectors as well as our high levels of cross border trade. To date, there has been some success but in order to boost innovation and optimise the possibilities that open banking offers, a number of improvements will be required involving banking, fintech, regulators, the Department of Finance and other stakeholders.”
Open banking allows for increased access to financial data with more choices and greater control
On the benefits of open banking, Mr Concannon continued: “For consumers, open banking allows for increased access to financial data with more choices and greater control. Open banking platforms can offer personalised insights and recommendations tailored to individual financial goals and circumstances as well as personalised advice on budgeting, saving and investment strategies. For business, it opens the door to a wider range of loan and credit providers, greater control of cash flows and planning, streamlining payments and better risk management.”
“However, for consumers to embrace open banking, they must be able to trust in the security, reliability and privacy of the systems and services involved. This trust is built through transparent, clear communication, and robust data protection measures that have been put in place under EU regulation. A key recommendation in the report is to include the development of an education campaign as part of the forthcoming National Payments Strategy (NPS), with a view to not only highlighting the benefits of open banking but also raising awareness on the rights and protections afforded to consumers so that people can have confidence that their financial data is secure and that they have control over how it is used.”
Mr Concannon concluded: “Ultimately, if we are to optimise the potential of open banking in Ireland, we need collaboration. For example, FPAI is planning to co-ordinate regular engagement between banks and fintechs with a view to addressing technical challenges and exploring opportunities for ongoing industry collaboration. However, in order to ensure Irish customers benefit from the full extent of open banking, as well as establish Ireland as a prime location for fintechs to establish and grow their operations, a framework for public-private collaboration will be required.”
The report makes six key recommendations which have been submitted through the NPS consultation process:
- Establishment of an industry Open Banking Working Group to bring banks and fintechs together to discuss shared challenges and opportunities
- Development of a communications plan on user education and trust for open banking
- A framework & accountable body for monitoring & reporting on Open Banking progress
- Regulatory and industry engagement on Instant Payment and PSD3 Implementation
- Industry collaboration on fraud mitigation measures
- Develop a national open API and data strategy with clear goals and objectives
The FPAI open banking report, produced in association with KPMG, draws on extensive expertise, discussion and insights from FPAI members and broad representation from industry through FPAI’s Open Banking Working Group (OBWG). ‘Unlocking Financial Innovation’ is available to download here.
FPAI, in association with Deloitte and Square, will host FintechNation 24 on Friday 20th September 2024 at the Convention Centre Dublin, where industry experts will explore the benefits and challenges of open banking, among other key issues in the financial technology sector. Details and registration for FintechNation 24 can be found here.