Open banking has been a hot topic within global
financial sectors for the past few years, with the UK, EU and Australia leading
the charge in implementing and embracing the financial services system. In
fact, more than 87% of
countries worldwide have established some form of Open API in the
banking industry – yet Switzerland is not considered to be a leader in this
space, but a ‘riser’, thanks to the unregulated nature of the market. But what
actually is open banking and what benefits and challenges might it present to
the Swiss market?
What is open banking and what is it used for?
Open banking is defined by
the Swiss Banking Association as “the
business model based on the standardised and secure exchange of data between
the bank and reliable third-party providers”. Using application programming
interfaces (APIs), open banking gives these providers access to consumer
banking, transaction and other financial data, allowing the networking of accounts
and data to provide more insights and services in a secure way.
The benefits of open banking are plentiful and
apply to consumers, providers and banks themselves. Things like switching
between banks, discovering new financial products and receiving tailored advice
and insights can all be made easier with open banking, while lenders can use
open banking to understand more about their customers to offer bespoke
solutions, such as loans or mortage products, as is the case with Mojo
Mortgages. Customers can track their spending habits across all their accounts
and providers, with the likes of Moneybox and Yolt offering tracking and
savings solutions that provide much more detail than traditional banking apps.
Open banking will force large, established banks
to improve their technology and customer service offerings, competing with
startups and fintechs to ultimately usher in a financial landscape that has
lower costs, better customer service and more sophisticated technology.
What is the resistance to open banking?
Despite open banking providing enhanced levels
of flexibility and oversight to consumers, it has not been readily adopted in
all nations, and Switzerland has been very cautious about implementing it nation-wide.
The historically conservative financial centre has been reactive in its
approach, waiting to see how initiatives work in other markets and assessing
the perceived risks. The shift toward an open data sharing model has led some
to raising security concerns, with banks potentially exposed to financial and
reputational damage in the event of an unstable system. Regulatory guidelines
can help to address these risks and allow supervisory authorities to monitor
developments and implement safety measures to protect against fraud and data
Switzerland’s adoption of open banking
While open banking could now be described as a
global phenomenon, Swiss legislators have responded more slowly and cautiously
than pioneers like the UK. The Swiss Bankers Association rejected a
proposal for the PSD2 to be adapted for
Switzerland, which has encouraged conversation between trade groups about the
best way to approach a regulated open banking solution. Because the Swiss
parliament has shied away from promoting open banking through regulatory
measures, and Switzerland is not legally obligated to transpose European
directives – such as a PSD2 – to national law, it’s been left up to financial
institutions and other groups to drive open banking forward. There’s a focus on
developing a widespread API standard amongst all stakeholders, however with no
regulators setting conditions or standards on behalf of the nation, Switzerland
lags behind other parts of the world in adopting open banking.
We have seen organisations introduce initiatives
to develop standards for banks and providers to enter open banking in the
country, with the likes of OpenBankingProject.ch and SIX Connectively Platform
working to facilitate open banking cooperation and information exchange within
banks, fintechs and integration providers. Recently, Credit
Suisse and KLARA have emerged as the first partners to be
connected via SIX platform b:Link, which allows them to offer additional
payment transaction applications to SMEs. This move may signal more adoption of
open banking by Swiss companies in the future.
With the retail market evolving and new entrants
already providing competition to banks, expectations of both financial
institutions and customers will continue to increase. As we see the success of
open banking overseas, we’ll likely see customers demand more from their
providers and have higher expectations of the types of services on offer. To
remain competitive and retain their valued customers, Swiss banks and financial
institutions may well begin opening their systems to third parties in a
proactive move to provide more advanced banking systems, even if regulations do
not force them to do so.
Stay up to date on the open banking landscape
At Swisslinx, we’re always interested in seeing
how the financial services market evolves and embraces innovation, and how our
clients and candidates fit in. Find out more about the financial
services jobs we have available, or read our blogs
for more insights on this and other markets in Switzerland and abroad.