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 breaches.

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.

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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.