Fintechs Now See Open Banking Technology As on the Edge of Mass Relevance

Open banking is getting closer to mass relevance for financial-technology companies. A study released Monday by Discover Global Network and 451 Research found that fully 78% of fintechs said open banking is relevant to their business. One likely factor behind that trend is the positive consumer sentiment that fintechs are seeing when it comes to open-banking technology, the report found.

According to the report, 68% of consumers like open banking because it results in faster credit approvals. Among the use cases garnering the most interest from consumers are receiving faster credit approvals (68%) and a consolidated view of financial accounts (68%).

That bodes well for fintechs developing open-banking technology as consumers are showing strong interest in fintech applications. In the United States, 87% of consumers have at least one fintech app on a smart phone, and 49% have three or more, up from 36% in 2021, according to the report, which surveyed 4,037 consumers and 852 fintechs globally. Open-banking technology enables links to consumer accounts to verify account ownership and funds availability.

“Open banking enables enhanced connectivity between financial institutions and fintechs,” Jordan McKee, director of fintech research and advisory at 451 Research, says by email. “This helps fintechs to streamline their customer experience while improving data quality and data access.”

The study also revealed that 63% of fintechs show a strong interest in partnering with a payment network to develop open-banking solutions. “Our research indicated that fintechs are looking for partners that can help them efficiently expand their businesses and reach more customers,” McKee says. “Payment networks have a strong story to tell here, helping to bring scale, global reach and credibility.”

In addition to looking to partner with payment networks on open-banking solutions, fintechs see other opportunities to partner with fintechs, the study found. For example, 60% of fintechs showed strong interest in partnering with a payment network to develop cryptocurrency solutions, and 60% showed strong interest in partnering with a payment network to develop embedded-finance or banking-as-a-service solutions.

When it comes to embedded finance and banking-as-a-service, 75% of fintechs say those technologies are relevant to their business.

“Embedded finance is changing the distribution model for financial services,” says McKee. “Financial products are increasingly becoming integrated within the applications consumers and business are already using. Fintechs see a clear opportunity to help enable this trend by delivering their products and infrastructure on an as-a-service basis. This one-to-many model is seen as an attractive way to scale.”