Sergey Kondratenko: Prospects for open banking 2024

Open banking has undergone significant evolution since the days when it was just a fad, especially in the UK. In this country, he reached impressive heights and became a leader. Using the official statistics, fintech expert Sergey Kondratenko reports that by the middle of this year, 96.4 million payments were processed using open banking. At the same time, the user base grew by 7 million, which indicates its steady growth.

The specialist states that open banking has changed the landscape of the traditional banking sector; it has put an end to the monopoly on access to consumer financial data. The Payment Services Directive (PSD2) created the regulatory framework for this transformation. It allowed fintech companies to access sensitive information with customer consent. They also have the opportunity to provide competition to traditional banking institutions through innovative technologies. What other prospects for fintech have open banking revealed and what awaits it in the future?

Sergey Kondratenko is a recognized specialist in a wide range of e-commerce services with experience for many years. Now, Sergey is the owner and leader of a group of companies engaged not only in different segments of e-commerce, but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.

Open banking development trends – Sergey Kondratenko

The specialist suggests that the next stage of development, which will further strengthen open banking, is the Third Payment Services Directive (PSD3). It will contribute to even greater communication quality and customer satisfaction. Banks will be required to create permission dashboards so customers can see which third-party services have access to their payment accounts.

At the same time, Sergey Kondratenko emphasizes that open banking is not aimed at completely replacing traditional banking activities. Instead, it represents a powerful ally for the older banking institutions. It helps them modernize and stay relevant in the ever-changing financial market.

According to data from Statista, it is predicted that by 2024, more than 638 million people will use open banking. This impressive number indicates a significant increase in interest and participation in such an initiative.

However, it should be noted that despite the vast potential of open banking, only a small fraction of its promise has been realized to date. Data from McKinsey indicates that only 10% of the promise of the concept has been realized. This may be due to a variety of factors, including integration challenges, data security issues, and regulatory approvals.

API in open banking: key problems and risks – Sergey Kondratenko

The concept of open banking with an open API, according to the expert, offers many advantages. But at the same time, a number of risks arise that may threaten the security of financial flows. Sergey Kondratenko suggests paying attention to them.

1. Data security and financial privacy. When fully adapting the concept of banking using open APIs, the possible risks must also be taken into account. Open banking APIs may be at risk of data security breaches, use for terrorist financing, or unauthorized access to personal data. To combat such risks, strong regulatory plans must be developed.
2. Clients’ rights. Sergey Kondratenko is confident that it is important that the introduction of the concept of banking services through open APIs does not infringe on the rights of clients. This will require developing an effective complaints management system to protect their interests.

In addition, according to the expert, it is necessary to introduce a data exchange mechanism. It should be agreed upon by clients and provide them with the ability to accept or decline requests to share their information.

1. Risks of compliance with regulatory requirements. When implementing the open banking concept, banks can strive to comply with both local and international laws and regulations on data confidentiality in financial transactions. The expert warns that compliance can be challenging and involve compliance risks for a variety of reasons. They can be caused either by the banks themselves or by third-party FinTech companies or financial institutions. Therefore, it is important to take them into account when implementing the concept of an open banking API.
2. Cybersecurity risks. Cybersecurity threats have become increasingly serious these days, and cybercriminals are improving their techniques every day. And the exchange of data between parties can become fertile ground for an increase in the number of cybersecurity incidents and information theft.

“Banks and financial institutions must guarantee compensation to clients in case of data theft during an exchange,” says Sergey Kondratenko. – In addition, you need to pay attention to other potential risks such as data misuse, tampering and malware. Developers must proactively address these issues to ensure data privacy is protected.

However, despite the risks, open banking holds great prospects for the financial industry.

The growth of open banking: payment orchestration as an innovation in future fintech – Sergey Kondratenko

Innovations in the field of payment technologies are actively contributing to the growth of open banking. Many companies offer their clients a variety of payment management tools. Sergey Kondratenko explains that this term is called payment orchestration. They allow merchants to easily switch between different payment methods. This depends on various factors – geographical location, type of customer, nature of the transaction and transaction value.

Payment orchestration, according to the expert, contributes to the wider implementation of open banking. It allows retailers to save on high card payment processing fees, reduce the number of chargebacks and increase payment volumes.

According to Juniper Research, the global value of payments through open banking APIs could exceed $330 billion by 2027. This represents an impressive 482% increase from $57 billion in 2023. Analyzing open sources, Kondratenko reports that by 2024, Western Europe will account for 56% of the total volume of global API calls. In addition, new use cases such as bill payments are expected to add more than $59 billion to the global value of financial transactions by 2027. In the future, such statistics predict a significant expansion of the potential of open banking.

Sergey Kondratenko: open banking for business. What to expect in the near future?

• Fast and easy payments. Open banking allows businesses to quickly, securely and efficiently accept remote payments. They will be able to carry out direct interbank transactions without intermediaries, facilitating a smoother payment process.
• Savings on commissions. Open banking reduces transaction costs by reducing dependence on card payment systems. This helps businesses protect their profits by offering competitive prices.
• Anti-fraud. Sergey Kondratenko suggests that in the future, the introduction of open banking APIs will reduce the level of fraud by 61% by 2024. To increase the security of financial transactions, open banking allows the use of advanced encryption and real-time authentication. This should protect data confidentiality as much as possible from cyber attacks.
• Operational efficiency. Open banking automates and simplifies tasks such as accounting and compliance. This will lead to more efficient and streamlined operations. It provides greater protection against card fraud and chargebacks while reducing payment transaction costs.
• Satisfied clients. Customers can easily make payments using their mobile devices and secure online banking applications for authentication. This increases their level of trust in the company and increases conversion.

That is, this new stage in the field of financial data exchange opens up opportunities for small companies to compete with large players in the market. Sergey Kondratenko notes that open banking creates favorable dynamics in the remote payments market, with the active participation of mobile devices, mobile banking and legal support, and creates conditions for development. The digital environment in tandem with open banking provides ample opportunities to make successful data-driven financial decisions, improve risk assessment, ensure smooth payments, improve customer satisfaction and retention.