Open Banking Research Articles

Enhancing User Experience and Sustainability in Open Banking Using PLS-SEM

A framework empowering third-party providers to access individual financial data has revolutionized the financial services landscape. Despite the user-centric nature of FinTech solutions, research on post-adoption behavior remains relatively scarce. Given the pivotal role of FinTech in the modern financial industry, understanding the factors driving sustained adoption and continued usage is crucial. This study aims to explore the key determinants influencing users’ decisions to remain engaged with Open Banking solutions. We propose a model examining the impacts of various factors on user satisfaction and their intention to continue using Open Banking. Partial least squares structural equation modeling (PLS-SEM) was employed to validate this model. Our findings reveal that user satisfaction with the usage experience is the sole predictor of continued use intention, explaining 62% of the variance in continuance use intention (R2 = 0.62). Additionally, user satisfaction is influenced by perceived usefulness (β = 0.33, p < 0.001), trust (β = 0.24, p = 0.003), and convenience (β = 0.25, p = 0.006), accounting for 70.5% of the variance in satisfaction (R2 = 0.705). The practical implications of this study suggest that Open Banking providers should prioritize enhancing user satisfaction by improving the perceived usefulness and convenience of their applications while fostering trust to maintain user engagement. Furthermore, our findings emphasize that convenience and trust are critical levers that Open Banking providers can utilize to ensure long-term customer loyalty and adoption, particularly in developing economies.

BAAS: Banking as a service brings Industry disruption

Banking as a Service (BaaS) has emerged as a transformative force in the financial sector, challenging traditional banking models and offering innovative solutions. BaaS enables non-financial institutions to integrate banking services into their own products and platforms, leveraging the technology and infrastructure of licensed banks. This disruption has far-reaching implications for both established financial institutions and fintech startups. For traditional banks, BaaS presents an opportunity to expand their reach and generate new revenue streams by partnering with non-financial businesses. By offering their banking services through BaaS platforms, banks can tap into new customer segments and diversify their income sources. However, this also poses challenges, as banks must adapt to the changing competitive landscape and ensure their technology infrastructure can support BaaS offerings. For fintech startups, BaaS provides a cost-effective and efficient way to enter the financial market. By leveraging BaaS solutions, these startups can focus on developing innovative products and services without the need for significant upfront investments in banking infrastructure. This has led to a surge in fintech innovation, with startups offering a wide range of financial products and services, from payments and lending to wealth management. The disruption caused by BaaS is also driving a shift towards open banking, which promotes the sharing of customer data and financial information between banks and third-party providers. This increased transparency and competition is benefiting consumers by providing them with more choice and flexibility in their financial products and services.

The Impact of Open Banking Regulations on the Banking Industry

The Impact of Open Banking Regulations on the Banking Industry

Customer Insight to Digitalisation and Open-Banking in Nigeria

The business world is experiencing rapid technological integrations. Several innovations have contributed to the success of businesses as the customer continues to play a strategic role in innovation’s acceptance or rejection. Open banking is a disruptive innovation that represents a departure from the traditions in emerging markets where financial inclusion has been focused on the consumer. It is rapidly being adopted in developed economies with developing economies such as Nigeria and India making incursions in adopting the innovation. Its ability to impact the business environment and improve access to financial services depends on customers’ consented data thereby making customers significant to its success. The challenge is on rising data privacy violation and data leakage. The purpose of the study is to examine the determinants of the success of open banking in Nigeria from customers’ perspective. The study is a novel study in Nigeria following the focus of extant studies on application and challenges of the innovation. Cross-sectional survey, case study analysis and close-ended questionnaire were adopted in the study while structural equation modeling was employed in analysing the data. The findings revealed that customers consent to open banking is positively influenced by the direct effects of compatibility and customers’ perception of security and trust. Also, the success of the innovation is impacted by the negative link between perceived access, perceived risk and customers consent to open banking. The significant result of the indirect relationships also justifies the importance of these variables in ensuring the success of open banking in Nigeria. With this, emphasis is on strategic management and policy drives that ensure effectiveness and protection of customers.

Navigating the data economy : Key considerations for decision makers in banking

The European Commission (EC) is advancing the data economy through a series of regulatory reforms aimed at giving customers control of their data and fostering innovation in third-party contexts. While the costs of developing existing banking infrastructures and creating open application programming interfaces have largely fallen on banks, third-party service providers have benefitted from new revenue streams and increased customer relevance. As a result, banks risk disintermediation with some customer segments. The impending Financial Data Access (FiDA) regulation is set to expand these dynamics by extending the range of financial data made accessible for third parties. Simultaneously, the entry into force of the Electronic Identification Authentication and Trust Services 2.0 (eIDAS2) introduces a digital wallet that allows consumers and businesses to share their identity credentials in online customer journeys, offering banks the potential to engage more effectively in the data economy. The key question is whether the new reforms will encourage banks to seek opportunities beyond compliance; more so than with the Revised Payment Services Directive (PSD2) and open banking. This paper analyses the opportunities arising from FiDA, eIDAS2 and the Data Acts, providing strategic considerations for banks navigating the data economy. It emphasises that banks are ideally positioned to become data custodians by offering customers tools for the secure and reliable exchange of data-driven digital transactions across all sectors. Ultimately, this approach will unlock new value and enhance the relevance of banks in the data economy.

The dichotomy of inclusiveness and vulnerability as a consequence of banking platform development

The processes of digitalization transform the current banking sectors. Digitalization and the increasing role of FinTech are driving the platformization of banking services, affecting the participants involved in their development and operation. This article examines the relationship between capturing value by different banking platforms' participants and the process of their inclusivity and associated vulnerability. The conflict of basic goals is analyzed through the lens of Paradox Theory. Our contribution is a theoretical model that helps understand how the banking platform's inclusiveness leads to value co-creation while introducing vulnerabilities. The governance structure is essential for the context of value co-creation in banking platforms. The model of governance defines the relations between different platform co-creators and their inclusiveness in a particular model. This research refers to the European Union financial market. The motivation for this focus is the regulatory solutions, embracing open banking and open finance. Understanding these dynamics is essential for shaping future policies and ensuring the sustainable development of banking platforms.

Breaking the Boundaries in the Digital Age: Open Banking and Tax Evasion

In this paper, we examine the relationship between open banking and tax evasion. As the open banking literature is still evolving, we try to systematically analyze the literature on conventional banking and tax evasion and then extend the discussion in the context of open banking. The popularity of open baking recently raises a question about its relationship with tax evasion. Digital banking and digital taxation contributed positively to mitigating tax evasion in the context of conventional banking. However, in open banking, the customers can decide to what extent they will share any transaction-related data with their bank, while they can also choose to complete direct transactions with third parties. This creates a new challenge in relation to the mitigation of tax evasion, which is the focus of this paper. Due to lack of granular empirical data, we conduct a systematic literature review and a bibliometric analysis to track the development of the relevant academic debates and identify the arguments that have been presented in relation to this topic. This approach is recognized as well suited for emerging topics in finance research, particularly when data are scarce, as evidenced by studies on COVID-19 and biodiversity. We find that the gaps of the current regulatory framework, at both the national and supranational level, have created challenges and uncertainties at multiple levels. Nonetheless, the findings of the study suggest future research directions and offer valuable guidelines for regulators in utilizing open banking.

Open Banking as a New Stage in the Development of Financial Services

The article examines the issues of the formation and development of open banking in international and domestic practice, as well as the problems of legislative regulation of this area by the authorities regulating financial activities in different countries. The implementation of open banking ideas is currently fraught with a number of difficulties, since the disclosure of customer information affects the interests of various financial market players. В статье рассматриваются вопросы становления и развития открытого банкинга в международной и отечественной практике, а также проблемы законодательного регулирования данной сферы со стороны органов, регламентирующих финансовую деятельность в разных странах. Реализация идей открытого банкинга в настоящее время сопряжена с рядом трудностей, так как раскрытие информации о клиентах затрагивает интересы различных игроков финансового рынка.

New Sustainable Fintech Business Models Created by Open Application Programming Interface Technology: A Case Study of Korea’s Open Banking Application Programming Interface Platform

Fintech facilitates financial inclusion by introducing new sustainable and accessible business models in developing countries. Open banking API technology is used by various fintech businesses in both developing and developed countries, with varying effects on financial markets. It changes the financial market distribution structure by separating financial product manufacturing and distribution and intensifying competition between traditional financial institutions and fintech companies. Fintech companies innovate by using this tool to create new business models. In December 2019, Korea established a standardized “open banking API platform”, sharing an interbank payment network with fintech companies. It has since shown explosive growth, surpassing the trading volume of the UK, the country that introduced open banking APIs for the first time. This study analyzes new business models fintech companies created using this API technology. Based on existing literature, statistics from the platform operator (the Korea Financial Telecommunications and Clearings Institute), and investigations of 30 Korean fintech mobile applications, this study analyzes new fintech business models that provide financial services using this platform. These companies create sustainable business models by combining multiple APIs. Four representative business models (simple funds transfer, simple payment, cross-border remittance, and asset management) are analyzed to reveal how fintech companies create business models with open APIs.

Customer perceptions on open banking apps: Insights using Structural topic modeling

Open Banking Apps (OBA) are reshaping the financial landscape by blurring the line between technology services and traditional banking. Literature on OBA has overlooked post-adoption experience. We collected 89,788 customer reviews from the Google Play store and employed Structural Topic Modeling (STM) to extract the themes of discussion around OBA. We also explored the determinants of customer satisfaction based on the topics of discussion and review metadata. Our study highlights that Customer Service, Ease of User Interaction, and Digital Support have a positive impact on satisfaction, while Account Navigation and Personalized User Experience have a negative impact. The insights gained will aid business managers of OBA in making strategic decisions to improve customer satisfaction.

A Study on the Role of Open Banking in Women Empowerment through SHGs in India

A Study on the Role of Open Banking in Women Empowerment through SHGs in India

Open Banking goes to Washington: Lessons from the EU on regulatory-driven data sharing regimes

After representing the main country embracing a market-led approach to Open Banking, the U.S. is on the verge of switching to a regulatory-driven regime by mandating the sharing of financial data. Relying on the Section 1033 of the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) has, indeed, recently proposed a rulemaking on “Personal Financial Data Rights.” As the U.S. is, therefore, apparently following the EU, which has been at the forefront of the government-led Open Banking movement, the paper aims at analyzing the CFPB's proposal by taking stock of the EU experience. The review of the EU regulatory framework and its UK implementation provides useful insights about the functioning and challenging trade-offs of Open Banking, thus ultimately enabling us to assess whether the CFPB's proposal would provide significant added value for innovation and competition or would rather represent an unnecessary regulatory burden.

Personal Financial Data Sharing Mechanisms within the Open Banking Framework

Personal Financial Data Sharing Mechanisms within the Open Banking Framework

Open banking: an early review

PurposeThis paper offers an overview of the burgeoning literature on open banking, focusing on its implications for the financial sector.Design/methodology/approachThe paper reviews the recent developments in the nascent literature of open banking. In particular, it discusses the following issues. (1) the extent to which open banking fosters competition, drives innovation and enhances financial inclusion; (2) the impact of institutional arrangements on the outcomes of open banking initiatives and (3) the critical role of government in promoting open banking and regulating banking activities.FindingsThe paper concludes with a discussion on potential directions for future research. First, open banking introduces significant challenges to the traditional banking model. Furthermore, the interplay between open banking and financial risk presents an area ripe for exploration. Lastly, the importance of consumer education in the context of open banking cannot be overstated.Originality/valueOpen innovation enables financial institutions generate productive innovations as well as provide customers with significantly better services, by getting access to previously restricted customer data. However, currently non-bank and fintech lenders often face significant barriers in accessing comprehensive customer data, which restricts their capacity to support non-standard credit models. More emphasis is required to be assigned to research on the economic impact of open banking.

Secure Horizons: Strategic Customer Data Management in the Open Banking Evolution

Secure Horizons: Strategic Customer Data Management in the Open Banking Evolution

Enabling cross border open finance systems in Latin America: is consent enough to develop them?

ABSTRACT Since 2016, digital finances have been disrupted by the introduction of open banking policies, which would facilitate data sharing in this particular industry. The UK and the EU have led this approach through the adoption of legal rules that enabled data sharing between financial institutions, particularly payment services providers, under users’ permission; lately, this has been slowly expanded into other financial services and called open finance. In this respect, certain Latin American countries have followed this, particularly led by industry efforts. In contrast to the EU, where the Digital Single Market facilitates the necessary conditions for sharing data, Latin America is fragmented in this respect. As such, this permission might be a weak basis for enabling a cross-border open finance ecosystem. This contribution will explore a selected cohort of Latin American countries and assess whether it would be feasible the development of a regional open finance system.

Understanding Vulnerability to the Poverty Premium: An Analysis of Factors Influencing Use of High-Cost Credit Among Low-Income Individuals

Introduction & BackgroundAccess to affordable credit is essential for individuals living on low incomes to participate in society fully. However, due to their limited credit history and volatile incomes, many cannot access mainstream sources of credit, such as credit cards and personal loans. As a result, they often must rely on more expensive sources of credit such as payday loans, doorstep loans or rent-to-own loans. This leads to them paying more for credit, also referred to as the poverty premium. Incurring the poverty premium exacerbates the financial challenges faced by already vulnerable individuals and can lead to a cycle of financial distress. Identifying the behaviours and factors that lead to a need for high-cost credit can help in identifying individuals who are most vulnerable to incurring the poverty premium. Objectives & ApproachTo achieve this, we rely on anonymized Open Banking transaction data from 100,000 individuals provided by a UK-based social lender.Given the latent nature of vulnerability, we identify indicators of vulnerability to poverty premium which include frequency of overdraft use, previous debt problems, low financial resilience, and indebtedness. We use a copula-based approach to create an index of vulnerability to poverty premium. This is based on weighting the individual indicators using their Spearman rank correlation coefficient. We use a fixed effects model to identify the factors that contribute to this vulnerability, where the index of vulnerability is the dependent variable. Relevance to Digital FootprintsWe use a rich and granular dataset on individual financial transactions to address a key social issue. The findings from this study can inform policy and industry efforts to promote greater credit affordability for these vulnerable individuals. This is particularly important due to the renewed concerns regarding the increased use of high-cost credit by individuals living on low incomes due to COVID-19 and the increased cost of living. ResultsOur findings show that variables related to the financial profile of an individual are important driving factors of the vulnerability to poverty premium. These include the number of salary sources, frequency of salary receipt, benefit receipt and savings frequency. Other variables related to spending behaviour such as gambling, volatility in fixed expenses and high transaction counts all have positive relationships with this vulnerability. Conclusions & ImplicationsThis study is a first step towards examining the determinants of vulnerability to poverty premium by analyzing an Open Banking transaction data set. The innovative feature of this work is the creation of an index of vulnerability to poverty premiums based on various indicators of financial distress and high-cost credit use. Our findings on the relationships between the individual's financial profile and the vulnerability to poverty premium suggest that policymakers should consider targeting interventions for individuals with specific profiles to alleviate the need for high-cost credit. For example, programs to promote regular savings or financial education for gamblers and people with volatile spending behaviour can help assist these individuals manage their finances better.

Digital Financial Services Effort in Enforcing Anti-Money Laundering through Open Banking Optimization

Technology has revolutionized finance, but seamless services increase fraud risks. As digital finance grows, anti-money laundering (AML) systems struggle with high transaction volumes. The main objective of this study is to verify whether open banking catalyzes the efficiency of transaction monitoring in AML. Another objective is to analyze the current agenda of regulators in Indonesia, which is related to the Indonesia Payment Systems Blueprint 2025 and customer data security. The Delphi technique pinpointed contemporary AML compliance technologies, encompassing money laundering, Regulatory Technology, and regulatory bodies. The article delves into a comparative analysis between Regulatory Technology and financial crime, which emphasizes several actions to eradicate money laundering, such as strengthening the AML system, customer screening, and allowing cross-data sharing between institutions. In addition, this paper explores RegTech's limitations and forthcoming hurdles regarding AML compliance. The finding shows that open banking catalyzes the efficiency of transaction monitoring in AML and supports the regulator's agenda to combat money laundering with some requirements.

ANALYSIS OF THE USE OF ARTIFICIAL INTELLIGENCE IN THE DIGITAL FINANCIAL ENVIRONMENT IN UKRAINE

The significance of the research is determined by the fact that the use of AI in the digital financial environment of Ukraine opens numerous opportunities for improving its efficiency, security, accessibility, and innovation. Therefore, this article is devoted to the analysis of the specifics of using artificial intelligence in the digital financial environment in Ukraine. Within the research, it has been proven that artificial intelligence is actively being implemented and adapted to the needs of various areas of the digital financial environment through specific transformations. It has been concluded that among the transformations driven by the use of artificial intelligence in the digital financial environment in Ukraine, we can distinguish the growing popularity of remote payments, the expansion of open banking usage, the development of digital identification, the advancement in financial data analysis, fraud detection, process automation, and the provision of personalized financial advice, the increase in the number of fintech companies working with AI, the heightened focus on cybersecurity, and the active regulation of the digital financial environment.

The relationship between gambling behaviour and gambling-related harm: A data fusion approach using open banking data.

UK-based gambling policymakers have proposed affordability checks starting at monthly losses of £125. The present study combines open banking data with self-reports of the Problem Gambling Severity Index (PGSI) and other relevant information to explore the harm profiles of people who gamble at different levels of electronic gambling behaviour. This was a data fusion study in which participants consented to share their bank data via an open banking application programming interface (API) and who also completed relevant self-report items. Hierarchical hurdle models were used to predict being an at-risk gambler (PGSI > 0) and being a 'higher-risk' gambler (higher PGSI scores among those with non-zero scores) using four specifications of electronic gambling behaviour (net-spend, outgoing expenditure, incoming withdrawals, interaction model combining expenditure and withdrawals), and by adding self-reported data across two additional steps. The study took place in the United Kingdom. Participants were past-year people who gamble (n = 424), recruited via Prolific. Self-report measures were used of gambling-related harm (PGSI), depression [Patient Health Questionnaire 9 (PHQ-9)], age and gender; bank-recorded measures of income and electronic gambling behaviour. Unharmed gamblers had an average monthly gambling net-spend of £16.41, compared with £208.91 among highest-risk gamblers (PGSI ≥ 5). Being an at-risk gambler (PGSI > 0) was predicted significantly by all four types of gambling behaviour throughout all three steps [1.08 ≤ odds ratios (ORs) ≤ 2.92; Ps < 0.001), with only outgoing expenditure being significant in the interaction model (2.26 ≤ ORs ≤ 2.81; Ps < 0.001). Higher PHQ-9 scores also predicted at-risk gambling in steps 2-3 (1.09 ≤ ORs ≤ 1.10; Ps < 0.001), as did lower age (0.95 ≤ ORs ≤ 0.96; Ps < 0.001) and male gender identity in step 3 (2.51 ≤ ORs ≤ 2.95; Ps < 0.001). Being a higher-risk gambler was predicted significantly by gambling behaviour only in the expenditure-only (1.16 ≤ ORs ≤ 1.17; Ps ≤ 0.048) and withdrawal-only (1.08 ≤ ORs ≤ 1.09; Ps ≤ 0.004) models, and was not predicted by income (0.98 ≤ ORs ≤ 1.14; Ps ≥ 0.601), age (0.98 ≤ ORs ≤ 0.99; Ps ≥ 0.143) or male gender identity (1.07 ≤ ORs ≤ 1.15; Ps ≥ 0.472). The UK government's proposed affordability checks for gamblers should rarely affect people who are not experiencing gambling-related harm. At-risk gambling is predicted well by different types of gambling behaviour. Novel insights about gambling can be generated by fusing self-reported and objective data.