A number of improvements involving public and private partners will be required if the potential of open banking is to be optimised in Ireland.
That’s the conclusion of a new report by the Fintech and Payments Association of Ireland (FPAI) published today, which suggests open banking represents a significant shift in the way financial services are delivered and consumed.
Open banking involves the secure and seamless sharing of customer financial data between different financial institutions and third-party providers.
This allows customers to consolidate how they manage and move their money, through the use of banking and payment apps and budgeting tools.
“For consumers, open banking allows for increased access to financial data with more choices and greater control,” said Michael Concannon, Head of FPAI Strategy & Development.
“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.”
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The research finds that given our flourishing financial services and technology sectors, Ireland is in a strong position for fintechs to establish, test and scale open banking across the European market.
But in order to develop the innovation further, the report says stakeholders including banks, regulators, fintechs, the Department of Finance and others will need to collaborate.
Among the recommendations are that an industry Open Banking Working Group needs to be reconstituted to allow for that collaboration to take place.
A communications plans is also required, the report says, to assist with educating users on open banking and developing their trust in it.
“This trust is built through transparent, clear communication, and robust data protection measures that have been put in place under EU regulation,” Mr Concannon said.
“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.”
The study also says that a framework on open banking is required along with an accountable body for monitoring and reporting on its progress.
Fraud mitigation measures also need to be developed through a process of industry collaboration, it recommends.
While a national open API and data strategy, with clear goals and objectives is needed, it says.
It also proposes additional regulatory and industry engagement on instant payment and implementation of a proposed new EU directive about payments, data and security, PSD3.
“Ultimately, if we are to optimise the potential of open banking in Ireland, we need collaboration,” Mr Concannon said.
“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.”