2024 Open Banking Predictions: From Huw Davies

With the start of a new year comes predictions for what that year might hold and in the world of open banking, where things move at pace, these predictions can be a little harder to pinpoint but a lot more interesting to explore.

So, we decided to sit down with Ozone API’s Co-CEO, Huw Davies, to find out what he thinks might be in store for 2024.

2024 Open Banking Predictions from CEO Huw Davies

Will open banking still be a big focus in 2024?

As we enter 2024, we’re still seeing open banking and open finance gaining momentum on a global scale. Established markets are still experiencing a continual rise in usage, while other regions are swiftly embracing these concepts and moving towards implementation.

Latin America and the Middle East continue to be hotbeds of open banking implementation. And following the FCPB’s announcement in November the starting gun has truly fired in North America.

We’re also now starting to see the early stages of banks really understanding the opportunity beyond just meeting regulation and they’re starting to move.

Notably, banks are increasingly recognising that the same open APIs deliver transformative potential in product distribution, customer outreach, and enable their solutions to be seamlessly integrated into digital experiences.

Although it’s early stages for many, innovative large banks are notably progressing in the right direction.

So yes, it will still be a big focus in 2024. In fact 2024 will be the biggest year yet.

How will it differ between the biggest financial institutions and the rest?

Large financial institutions are continuing to invest to enhance their digital capabilities and their API foundations. This remains key to adapting to thrive within a digitally embedded ecosystem.

Meanwhile, new entrants, equipped with impressive technology, grapple with the significant hurdle of establishing meaningful distribution channels, spanning the spectrum in between these extremes.

However, the pivotal element for success lies in acknowledging that exceptional technology serves as a crucial facilitator, but its true potential is unlocked when coupled with strategic thinking focused on delivering tangible value to the customer.

Either element in isolation falls short of achieving comprehensive success.

How are banks thinking about embedded finance?

Without a doubt, the trajectory of integrating financial experiences into digital experiences is set to continue, demanding that banks continuously evolve their tools.

Embedded finance is not about stand alone platforms and new fintechs. It’s about the providers of financial products (for example banks) making them accessible via APIs so that they can be embedded into digital experiences.

Being there for the customer at the right time, in the right place and with the right context.

This evolution is essential for ensuring the secure yet seamless presentation of bank products and services; failure to do so will result in being overshadowed by competitors.

While traditionally, banks heavily relied on their proprietary channels for customer interactions, this dominance is unlikely to endure in the medium to long term.

In 2024 I think we’ll see a shift in the dialogue with banks at the heart of open finance discussions rather than it being the domain of a small number of fintech specialists.

What does 2024 mean for Ozone API?

We’re hugely excited about the ever increasing worldwide momentum in open finance.

Nearly all markets are progressing along this trajectory, and the establishment of secure, consent-based access to financial services through APIs is beginning to unlock substantial potential.

This development is particularly impactful in growing economies, addressing financial inclusion challenges, and paving the way for new revenue streams for banks. 2024 is poised to be the most significant year yet for these advancements.

Our focus has been global from the outset. We support all global standards and are helping banks, financial institutions and regulators to deliver.

2024 will be the biggest year yet for open banking and at Ozone API we are excited about being at the forefront of driving this acceleration.

What other areas in Open Banking and Financial Services do we predict change in?

There are a number of other areas that we should keep an eye towards in 2024. These include:

A focus on Consumer Duty

Consumer Duty, a major publication implemented in July 2023, asks firms to ensure that retail customers have the best possible experience and outcome. All elements of Consumer Duty are overlooked and assessed by the FCA.

There are many great practices have been introduced or seen further development through Consumer Duty, such as:

Signalling to sales teams that actions and behaviour should be built around positive customer outcomes.
Sharing responsibility for good customer outcomes across the entire business, and not just risk and compliance teams.
Ensure that from the Board level, consideration is given to customer outcomes and how that might affect their business.
Incentivise staff with new bonus structures that meet the expectations of the Duty.
Create and build data and metrics to understand customer needs and journeys, and to introduce appropriate governance to prevent problems.

But there are still areas for improvement, which we predict 2024 will see continued efforts towards. These include:

Firms need to genuinely understand the data they receive from customers, so they can make positive changes. Complacency and the repackaging of existing data must be avoided.
Proactively identify and address issues and risks of harm, to avoid waiting to see if the FCA will handle any issue. This can greatly improve customer outcomes and reduce issue complexity.
Ensure that the Consumer Duty is discussed at the Board level as well as among risk and compliance and other teams. This ensures that thorough strategies and policies can be laid out across the company.

The FCA, and Cryptoasset approval and promotion

In 2023, the financial promotion restriction to crypto assets was introduced. In short, this means that firms that wish to make a financial promotion relating to a qualifying crypto asset can only legally do so if the promotion is communicated by an FCA or PRA-authorised individual.

The FCA will likely see an influx of breaches in compliance over this new restriction.

Updated Payments

Faster Payments will see improvements in 2024. We can also expect to see the Financial Services and Markets Act 2023 and Payment Services Regulations 2017 reforms start to take shape. Alongside this, we can potentially expect SCA (strong customer authentication) to be replaced with an outcomes-based regime by the FCA.

Buy-now Pay-later schemes

We can expect an update to consumer credit laws in 2024 to help combat issues arising from Buy-now Pay-later schemes, such as missed payments and debt. Despite these issues, Buy-now pay-later schemes are incredibly popular, and growth rates are phenomenal vs bank transfers and digital wallets.

Prepare for the Digital Operational Resilience Act

The EU’s Digital Operational Resilience Act (DORA), will be finalised in mid-2024, and to be implemented in January 2025. This Act refers explicitly to ICT risk, and upon its implementation, financial institutions must follow all rules on protection, detection, containment, recovery and repair capabilities against any ICT-related incidents.

Financial Institutions should begin preparation for this change as efficiently as possible, and expect rules on ICT risk management, incident reporting, operational resilience and ICT third-party risk monitoring to take precedence.

Private Equity

Investments in businesses that employ AI-driven solutions will see a rise, especially when those solutions can improve efficiencies and reduce costs. As Open Banking continues to take shape, we can also expect greater investment in FinTechs.

ESG Commitments

Firms should continue their commitments towards ESG, and be prepared to demonstrate those commitments. Expect large developments in 2024 with new sustainability reporting regimes across the UK, and continue to watch the effects of CSRD across EU and non-EU businesses.

Clifford Chance provides further insight into these elements and other predictions for ESG in 2024.

Learn More About Open Banking Today

We have a range of useful learning materials for those looking to improve their knowledge of Open Banking. Select from our list below to continue your Open Banking journey:

Ozone – The Open Banking API

At Ozone API we specialise in an ‘out of the box’ compliance package for banks and financial institutions, where open standards and regulations are easily managed.

Through our API, compliance can be achieved within weeks, saving banks and financial institutions valuable time and resources.

Reach out to a member of our team to discuss Ozone API today