It’s been a busy quarter for Mastercard and its partners in the open banking arena. Despite the disruption caused by the coronavirus pandemic, our European Open Banking Tracker reveals activity across the continent has grown at pace. Meanwhile, we’re enhancing our capabilities to enable and safeguard the open banking ecosystem around the world.

In June, we announced our intention to acquire Finicity, a leading North American provider of real-time access to financial data and insights. The addition of Finicity’s technology and talent strengthens our existing open banking capabilities, enhances our collaboration and co-creation efforts with fintechs and financial institutions, and furthers our commitment to consumer-centric data protection and practices. Keep an eye out for further announcements in this space.

This month, we also announced our collaboration with Aion (a digital bank powered by AI), DiPocket (a wearable pre-paid technology provider) and Modulr (the leading provider of wholesale and commercial transaction banking services for businesses). These financial firms are the latest companies to start using Mastercard’s Open Banking Protect solution to defend themselves and their customers against compromised or unauthorised third-party providers (TPPs).

Open Banking Protect is enabled in part by Konsentus, the software as a service company in which Mastercard is invested, and with whom we collaborate to bring you our Open Banking Tracker. The Protect service provides real-time verification of TPP identity and regulatory status against all relevant directories and registers, including more than 115 National Competent Authority registers. Verification is augmented with real-time behavioural monitoring, which uses network-level data on a given TPP to help detect trends and changes to regular activities and prevent potentially fraudulent requests.

Learn more about Mastercard Open Banking Solutions™ at mastercard.com/openbanking

Headlines to 30 June 2020

  • 361 third-party providers are registered with a National Competent Authority in Europe
  • The quarter saw a 29.4 percent increase in number of registered third-party providers
  • Every country has at least 55 registered third-parties through European passporting rules
  • 94 percent of third-parties are registered to provide account information services 

Read a full summary of growth and progress in Open Banking for Q2 2020 below.

Open Banking to end of Q2 2020

Number of registrations

At the end of Q1 2020, we reported that 279 third-parties had registered with a European National Competent Authority. January to March had seen the slowest growth in new registrations for nearly half a year. We welcome the idea that the market was beginning to mature.

At the end of Q2, the total number of third-party providers was 361, which represents a 29.4 percent growth on the previous quarter. This is the highest rate of increase since Q3 2019, and shows there’s real vigour in the industry. The flurry of activity took place during the height of the coronavirus pandemic. Short-term impacts include increased eCommerce and more people using digital tools to manage their money rather than visit a branch.

Konsentus makes projections for how the open banking landscape will evolve into Q3 2020. Based on historic data and growth trends, they expect the number of TPPs to reach 417 by the end of September 2020. We’re excited to see whether this momentum will be sustained, and which new services come to market over the next three months.

Location of registrations

The UK still leads Europe with a total 207 third-parties licensed to operate under European passporting rules. Most new third parties this quarter are registered with the UK’s Financial Conduct Authority, and UK home registrations now total 170 (47%). Germany and Sweden round up the top three with 116 and 94 total registrations respectively, including both home and passported.

Passporting is becoming an increasingly popular route to European markets. All countries now have at least 55 third-parties licensed to operate in their market under passporting arrangements, up from 44 the previous quarter. Ten countries didn’t record any new home registrations during the three months, and four (Latvia, Malta, Portugal and Romania) still have no home registrations. It’s likely we’ll see future growth continue from the more mature markets as third-parties scale their operations across the region.

Types of solutions

As of 30 June, 168 third parties (47%) are registered to provide only account information services (AISPs), and 21 third parties (6%) are registered to provide only payment initiation services (PISPs). Forty-eight percent, or 172 third-party providers are registered to provide both services — the first time dual providers have comprised the majority.

This is a continuation of what is by now a well-established trend. When we launched our tracker following the deadline for European banks to comply with PSD2, we reported that provision of services based around account data were most common among new participants to the market.

A number of third parties that had previously registered as PISPs in Europe have since additionally registered as AISPs, and more than half of institutions (187) that are registered to provide open banking-enabled services are themselves independently authorised to provide and execute payment services which are not connected to taking deposits or issuing electronic money. A further fifty, or 14 percent, are classed as e-money institutions. Open banking offers an opportunity to diversify their business to provide a more holistic payments and financial services offering.

It’s a sensible strategy, given the strong demand for account information services: As part of our biannual research into the state of pay in the UK, we asked about people’s attitudes to data sharing and the kind of Open Banking-enabled solutions they would be most interested in. Just over a third of respondents (38%) were willing to share their personal data with a bank or credit card company in order to receive a financial benefit (such as a lower interest rate on a loan, mortgage or credit card) and just under a third (32%) were willing to do so for an account aggregation service. Younger respondents aged 16 to 44 years old were more willing to provide a bank or credit card company with access to their personal data for these kinds of benefits than those aged 45 and over.

Other research tells us that money management and alternative credit, such as peer lending, are the services consumers are most open to taking up with bank alternatives, but only one in four consumers show appetite to use a payments initiation service for online payments.[2] But as we noted in our recent discussion on combatting fraud open banking, people’s appetite for and willingness to adopt payment initiation services differs across the European — and global — market, where similar existing solutions are more commonplace. As provision of open banking-enabled payments grows, and people learn to trust the industry’s practices around fraud protection and dispute resolution, we hope more people will come to realise the benefits.  

Open banking users and activity

According to latest data from the OBIE, the number of successful calls made by third-party providers using account providers’ APIs in the UK has begun to stabilise around 410.2 million per month. At times last year, it looked as though erratic API performance would slow adoption of open banking-enabled services, with people thinking them unreliable or untrustworthy. But recent data is a lot more encouraging: In May, the average response time per API call was 734 milliseconds; API availability netted out at 99.99 percent, and 99.00 percent of API calls successful.

Adoption of open banking-enabled services is growing steadily around the world. Juniper Research extended forecast data predicts steady growth in the number of open banking users from 18.4 million in 2019 to 26.9 million in 2020. The majority of these users will continue to be in Western Europe (8.2m), but China (6.6m), the Indian sub-continent (3.0m) and North America (2.1m) are also expected to see a significant increase.

Juniper Research predicts the total number of account information services API calls to rise from 8.6 billion in 2019 to 20.9 billion in 2020 (including 16.4 billion in Europe alone), and open banking-enabled payment transactions to grow exponentially from 2.7 million in 2019 to 17.6 million in 2020. In 2020, 5.2 percent of open banking users globally (10.1 percent in West Europe) will make payments; on average 15.0 payments each.[3]

With growth comes opportunity and challenges. At Mastercard, we will continue to support all participants in the open banking ecosystem to enable a vibrant and competitive financial services landscape as it continues to evolve.

 

Information correct as of 13 July 2020
Data provided by Konsentus. Analysis of EEA National Competent Authority and European Banking Authority PSD2 registers

[1] In June 2019, Mastercard led a multi-million-pound pre-Series A funding round in Konsentus
[2] RFI Group, Q2 2018
[3] Juniper Research extended forecast data, reported in ‘Open Banking: Opportunities, Challenges & Market Forecasts 2020–2024

Jim Wadsworth, SVP, Open Banking, Mastercard

Jim thrives on bringing bold ideas to life, and on driving results. With engineering degrees from Cambridge University and more than 20 years’ experience in the payments industry, Jim has run businesses for market leaders such as NatWest, Barclaycard, JP Morgan and Vodafone. He is now leading our proposition and product development work on Open Banking, co-ordinating across Vocalink and Mastercard.