Research: Lack of partnerships holding back open banking innovation

However, the research also finds that selecting the right partners is the second biggest issue faced by financial services companies investing in open banking, affecting more than a third (34%) of TLT's respondents. 

The study reveals that many significant open banking developments to date have been managed in-house, as banks and other market participants work towards regulatory compliance and proof of concepts. As the market matures, there will be a significant upswing in partnerships and collaborative projects. 

The report ‚Äì Opportunity Knocks: the future of open banking ‚Äì is based on the views of 130 senior decision makers across the UK financial services sector including banks, building societies, challengers, fintechs and payment service companies. 

Partners of choice

While in-house development has been popular so far, companies are starting to explore different types of collaboration. Banks are partnering with external consultancies and technology providers (32%), outsourcing services (28%) and buying in technology via service agreements and white-labelling (16%). 

Non-banks are also partnering with external consultancies (39%), buying in technology (13%) and outsourcing services (10%). 

Just 7% of banks and 4% of non-banks have so far obtained technology by corporate acquisition, but the majority (67%) say the market will become more consolidated as larger companies look to buy smaller ones to remain competitive and keep up with the pace of change. 

The challenge to identify the right partners is set against a backdrop of increasing competition and mounting pressure to quickly identify the right open banking strategy and move on it. A significant 84% of companies now have new open banking products and services due to launch or in development, many of which are expected to come to market during 2019. 

David Gardner, partner at TLT, says: "Collaboration is critical as the open banking market matures, because the core proposition favours input from multiple parties. Established players offer extensive customer reach, resources and experience, while new providers bring exciting new ideas, technology and techniques to the table, including data-driven insights into customer behaviour. When they work together, different players can maximise their respective strengths, creating new products that are more than the sum of their parts.

"Much of the focus in 2018 was on compliance projects ‚Äì particularly for the banks ‚Äì and proof of concepts, but we are now moving into a new year with far more collaboration and customer-facing innovation on the horizon. 

"Choosing the right legal and commercial model for partnerships and clearly documenting the parties’ responsibilities – particularly in key areas such as IP rights, data management and regulatory permissions – is vital to establishing a successful relationship, which allows the parties to realise their commercial objectives while managing legal and reputational risks.”