Two paradoxes of Open Banking

Abstract

The new services defined in the Second Payment Services Directive — account information and payment initiation — have been a trigger for banks to build new distribution channels that they now market under the term Open Banking. This paper reflects on possibly conflicting market expectations from the word ‘open’ in this respect. Being open might be counter-intuitive to the custodial nature and function of banks as well as to their long-lasting autonomous full-service provider role, which are both still enshrined in current legislation. Recent developments in Open Banking are described by a set of example use cases, which are analysed on regulatory, business and technology aspects. Based on the market expectations and the legislative context, two paradoxical expectations for Open Banking are identified and elaborated, one in the area of business models and the other in the regulatory domain.