# Trends in open banking in 2021  Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-02-17 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: 2021 Trends in Open Banking: Driving Financial Transformation Meta Description: Explore how Open Banking is shifting from compliance to a key driver of business strategy, leading towards digital transformation and global standards, driving URL: https://financedigest.com/trends-in-open-banking-in-2021html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/finance-10-1736838566704-compressed.jpg) _By **Seshika Fernando,** General Manager, Open Banking, WSO2_ 2021 will be characterised by volatility and uncertainty as financial [institutions](https://www.financedigest.com/strategies-for-financial-institutions-to-foster-innovation.html) navigate the economic and social impacts of COVID-19. The pandemic has delivered a systemic shock unlike anything seen in the modern era and this will reverberate across banking institutions and financial systems. [Open Banking is becoming a strong](https://www.financedigest.com/strong-customer-authentication-must-be-adopted-to-make-open-banking-a-success.html "Strong Customer Authentication must be adopted to make open banking a Success") driver within the financial world and it has the potential to enable communities and individuals to make informed financial choices as they recover from the pandemic’s impacts. From the evolution of [open banking standards to how banks may approach open banking as a tool to achieve business goals, there are strong signs that the coming year will see open banking become a strategic enabler](https://www.financedigest.com/the-open-banking-revolution-enabling-accessible-and-inclusive-finance.html "The open banking revolution – enabling accessible and inclusive finance") for financial institutions and the communities and individuals they serve. This drive will also prompt high demand for the connecting interfaces/APIs that power open banking and that will help to build an ecosystem that features a large range of diverse stakeholders from [traditional banking and fintech](https://www.financedigest.com/digital-banking-traditional-banks-vs-fintech-providers.html "Digital banking: Traditional banks vs. fintech providers") to third party innovators. The following are the [trends we expect to see emerging](https://www.financedigest.com/optical-satellite-communication-market-emerging-trends-to-boost-the-global-revenue-growth-discussed-in-a-new-market-research-report-by-tmr.html "Optical Satellite Communication Market – Emerging Trends to Boost the Global Revenue Growth Discussed in a New Market Research Report by TMR") or consolidating in 2021. **Trend 1**: **Financial institutions shift from compliance-driven adoption of open banking to a [key driver of business strategy](https://www.financedigest.com/foot-orthotic-insoles-market-to-generate-us-5-billion-by-2026-growth-key-business-strategies.html "Foot Orthotic Insoles Market to Generate US$ 5 Billion by 2026 | Growth & Key Business Strategies").** As progressive proponents of open banking are beginning to [reap commercial benefits](https://www.financedigest.com/inflation-trade-nestle-reaps-benefits-from-higher-prices.html "Inflation trade? Nestle reaps benefits from higher prices"), more institutions will realise that there is more to open [banking](https://www.financedigest.com/emerging-global-trends-in-digital-finance-and-banking-innovation.html) than compliance. [Open banking can and should be a journey towards digital transformation](https://www.financedigest.com/open-finance-the-next-step-for-global-digital-transformation.html "Open finance – the next step for global digital transformation"), especially for banks looking to improve consumer experiences. This will usher in more focus on solving consumer problems and integrating them into the fintech ecosystem. It will help create higher-value offerings through partnerships, and cut costs, in a [challenging business](https://www.financedigest.com/global-lycopene-market-outlook-business-challenges-investment-opportunities-progression-status-revenue-expectation-and-forecast-2022-2029.html "Global Lycopene Market Outlook Business Challenges, Investment Opportunities, Progression Status, Revenue Expectation and Forecast 2022-2029") climate. **Trend 2: We’ll** [see further movement towards a common core for standards globally](https://www.financedigest.com/imfs-georgieva-sees-darkening-outlook-for-global-economy-rising-recession-risks.html "IMF’s Georgieva sees ‘darkening’ outlook for global economy, rising recession risks") [Open banking](https://www.financedigest.com/why-open-banking-is-safe.html "WHY OPEN BANKING IS SAFE?") standards are largely evolving from a common denominator – the open banking standard in the UK – and there is a lot of commonality across jurisdictions. This is a big [potential opportunity](https://www.financedigest.com/case-handling-machines-market-global-size-growth-opportunities-industry-potential-segmentation-overview-trends-and-forecast-studies-2028.html "Case Handling Machines Market Global Size, Growth Opportunities, Industry Potential, Segmentation Overview, Trends And Forecast Studies 2028") for fintech firms to develop cross-border services that serve a highly mobile client base unbounded by geographical restrictions. Regulators are already considering cross-border interoperability in looking at the future evolution of [open banking](https://www.financedigest.com/open-banking-as-a-means-to-enhance-social-commerce-security.html "Open banking as a means to enhance social commerce security") as seen with the second Farrell Review on the Consumer Data Right in Australia and with New Zealand’s proposed Consumer Data Right. Similar moves are inevitable in mature open [banking markets in the UK and the EU as they look to promote international trade and business and improve](https://www.financedigest.com/improving-reputation-in-the-banking-sector-through-marketing-communications.html "IMPROVING REPUTATION IN THE BANKING SECTOR THROUGH MARKETING COMMUNICATIONS") consumer experiences. **Trend 3: COVID-19 drives** [need for greater financial literacy and flexibility provided by open banking](https://www.financedigest.com/embedded-finance-is-the-new-norm-in-banking-but-what-is-needed-to-unleash-its-full-potential.html "Embedded finance is the new ‘norm’ in banking, but what is needed to unleash its full potential? ") The millions of [people affected economically by COVID-19 need](https://www.financedigest.com/people-need-people-humanising-the-digital-banking-experience.html "People need People – Humanising the digital banking experience") information and flexibility to help make better financial decisions on loans, investment and savings products that will give them better outcomes as they try to recover. The pandemic has truly [heightened the need for an ecosystem approach that goes beyond single institutions and helps consumers](https://www.financedigest.com/is-spring-really-in-the-air-heightened-consumer-confidence-may-not-be-enough-this-season-for-small-businesses.html "Is Spring Really in the Air? Heightened Consumer Confidence May Not Be Enough This Season for Small Businesses") access and evaluate alternatives across the whole spectrum of products and services. There must be greater visibility provided of the different [options that people can access to help get back](https://www.financedigest.com/analysis-u-s-retail-traders-pile-back-into-options-as-meme-stock-mania-flares.html "Analysis-U.S. retail traders pile back into options as meme-stock mania flares") on their feet. This could be sub-prime lending, alternative lending, switching to a better [product or investing in a different way that suits their current position and desired future](https://www.financedigest.com/organic-soy-products-market-outlook-current-and-future-industry-landscape-analysis-2029.html "Organic Soy Products Market Outlook, Current and Future Industry Landscape Analysis 2029") state. Open [banking enables third parties to create applications that give](https://www.financedigest.com/russian-central-bank-gives-legal-entities-green-light-to-trade-foreign-shares.html "Russian central bank gives legal entities green light to trade foreign shares") users a fuller understanding of their position and actions to take – this couldn’t be delivered by a single bank – and this will be very valuable to consumers. It is part of a broader drive towards data-driven decision-making for consumers across markets – a move that goes from “open banking to open [finance](https://www.financedigest.com/delivering-on-the-potential-of-open-finance.html "Delivering on the potential of open finance") to open life”. **Trend 4: US financial [regulators](https://www.financedigest.com/uk-finance-regulators-should-pay-heed-to-energy-security-policy-says-sunak.html "UK finance regulators should pay heed to energy security policy, says Sunak") will start to “catch up” with the market where industry-driven standards have seen wide adoption** The complexity of the US financial [regulatory framework](https://www.financedigest.com/how-to-navigate-multiple-data-privacy-regulatory-frameworks.html "How to navigate multiple data privacy regulatory frameworks") means we have not seen the same regulator-driven leadership to establish open banking standards as we have seen in other markets like the UK. In this vacuum, the initiatives like the FDX API standard [developed by  a diverse group of industry players](https://www.financedigest.com/bev-automotive-oil-filter-market-recent-industry-developments-and-growth-strategies-adopted-by-players.html "BEV Automotive Oil Filter Market: Recent Industry Developments and Growth Strategies Adopted by Players") have filled the gap in terms of providing a common language for secure, permissioned data sharing, recording impressive traction with 12 million users already. But regulation is starting to catch up, with the [Consumer Financial Protection](https://www.financedigest.com/the-digital-finance-revolution-empowered-consumers-turn-digital-to-protect-financial-security.html "The digital finance revolution: empowered consumers turn digital to protect financial security") Bureau (CFPB) announcing in October an advance notice of proposed rulemaking. This is the first step to creating formal [open banking regulation](https://www.financedigest.com/australia-financial-crimes-regulator-opens-investigation-into-britains-entain.html "Australia financial crimes regulator opens investigation into Britain’s Entain") in the US. As it has with other markets, we expect that the U.S. [government will codify and build on the industry-defined standards that are working](https://www.financedigest.com/uk-minister-says-government-will-work-with-obr-on-economic-forecasts.html "UK minister says government will work with OBR on economic forecasts") today. **Connecting the** [open banking ecosystem](https://www.financedigest.com/what-does-2022-hold-for-open-banking-some-predictions-from-the-ecosystem.html "What does 2022 hold for open banking? Some predictions from the ecosystem") Underpinning all these [trends will be demand](https://www.financedigest.com/car-bulb-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2028.html "Car Bulb Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2028") for connections between ecosystem players: banks, fintech firms and other third parties. The way to do that is to build good interfaces and those interfaces today are APIs. APIs have to be great, otherwise fintech firms will not [consume these consistently enough to deliver business results for the bank](https://www.financedigest.com/ant-group-starts-to-differentiate-consumer-loan-business-jiebei-from-bank-loans.html "Ant Group starts to differentiate consumer loan business Jiebei from bank loans"). The challenge is to be able to create the right APIs and then to ensure they are reliable, discoverable, usable, high-performing and flexible to offer long [term value](https://www.financedigest.com/benign-positional-vertigo-treatment-market-is-pegged-to-witness-sound-growth-in-terms-of-value.html "Benign Positional Vertigo Treatment Market Is Pegged To Witness Sound Growth In Terms Of Value") to both API consumers and their end-consumers. [Banks will need the right technology](https://www.financedigest.com/6-technology-trends-banking-2019.html "6 Technology Trends for Banking in 2019"), the right partners, and the right kind of commitment in implementing a robust digital strategy as it looks to move past the often-difficult early stage to build strong adoption across the ecosystem. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---