The rise of open banking has transformed the global financial services sector. It is fast becoming a key strategy that enables banks to remain competitive in an increasingly digital world. The innovative model has changed how financial data is shared and utilized, making it easier and more efficient for consumers and businesses to access the financial services and information they need. It also allows banks to offer more personalized services, among other benefits. However, open banking, which allows third-party providers to tap into financial data from traditional banks through application programming interfaces (APIs), has highlighted the need for data security to protect customer information.
This has resulted in the development of advanced security measures and the introduction of increasingly complex regulations to build trust in the sector and safeguard sensitive financial data. Here, we explore why compliance is evolving from a regulatory obligation into a strategic asset for financial institutions as they seek to enhance customer trust, drive operational efficiency, and foster innovation for long-term growth.
The evolving role of compliance in Open Banking
The EU’s Payment Services Directive Two (PSD2) and the implementation of PSD3 and the Payment Services Regulation (PSR), which are expected to be voted on by the EU Parliament and published before the summer of 2025, are anticipated to come into force by early 2027. By requiring secure data sharing and strong customer protections, these regulations aim to boost transparency and cultivate greater trust between consumers and financial institutions.
It has also led to explosive growth in data exchanges between banks and third-party providers. For instance, the number of Open Banking API calls is projected to rise from 102 billion in 2023 to 580 billion by 2027, with Europe’s share expected to reach 70% of the global total, according to Juniper Research. Regulators in the US are also taking action. The Consumer Financial Protection Bureau’s Section 1033 of the Dodd-Frank Act marks a major step toward ensuring data access through APIs, bringing the industry closer to a more standardized and secure approach to data sharing.
“Looking at how fintechs are evolving in the US, access to reliable banking data to support the growth of new use cases is crucial. The US is currently undergoing a significant transformation that will shape how data is shared between banks and fintechs,” Nicolas de Genot, Head of Product, Open Banking at SBS, says in our latest white paper, From Compliance to Competitiveness: Open Banking in the EU and the US. Adapting to regulations is crucial for financial institutions. This is necessary not only to avoid penalties and legal sanctions—which can reach as high as 7.5% of an organization’s consolidated turnover —but also to position themselves as trustworthy and future-ready organizations in an increasingly competitive market.
Compliance as a strategic asset
Adopting a compliance-driven approach offers numerous strategic advantages for banks and financial institutions. One of the most significant benefits is customer trust and transparency. By prioritizing data protection and privacy, banks show they are committed to safeguarding client information and exposing transparent permission dashboards on all banking channels for clients to take control—an important concern for today’s digitally savvy consumers. With 47% of consumers using at least three fintech apps and 13% utilizing six or more, there is clearly a strong expectation for secure and compliant data-sharing practices.
This trust is vital for retaining customers and crucial to building a positive reputation. Banks that prioritize customer privacy are more likely to inspire loyalty and reassurance among their clients. In addition to enhancing trust, compliance can lead to improved operational efficiency and reduced fraudulent activities. New regulations, including the PSR, now require advanced reporting and risk management, leading to numerous financial institutions investing in AI automation and other technologies to streamline processes and protect them from additional liabilities.
Despite the upfront expense, these technologies can significantly reduce human error and boost accuracy, resulting in cost savings and allowing banks to allocate more resources to higher-value activities that drive growth. A strong compliance foundation can also position banks for long-term growth. Banks and financial institutions with a robust compliance framework can quickly adapt to new developments as the regulatory landscape evolves. This allows them to embrace opportunities ahead of less-prepared rivals by offering services that meet current customer needs and comply with new mandates.
Driving innovation for competitive success
Open banking has expanded the range of innovative financial products and payment options through enhanced data-driven insights, reduced fees, and a user-friendly customer journey that allows control over data sharing. By standardizing APIs, banks are able to form valuable partnerships with fintechs, which has already led to personalized services such as personal finance management tools, faster bill payments and transfers, quicker approvals for loans and credit cards, and improved customer service.
However, compliance goes beyond regulatory requirements; it can also serve as a competitive advantage. By prioritizing data privacy, banks can stay ahead of their rivals by harnessing analytics to tailor their services while complying with data protection laws. The sector is already seeing the benefits of this. Juniper Research projects that open banking payments will surge from US$57 billion in 2023 to more than US$330 billion by 2027.
Additionally, EY research estimates a potential market size of over $200 billion by 2026 for account-to-account (A2A) payments in the US alone for consumer-to-business transactions. As regulations evolve, banks should consider compliance as a pillar of their competitive strategy. Beyond regulatory obligations, a proactive approach enables banks to secure consumer trust, innovate new financial products, and adapt to future regulatory changes. This will ultimately position them as leaders in customer satisfaction, operational excellence, and growth.
How SBS can help
The SBS Open Banking Platform enables seamless integration and data sharing between financial institutions and third-party providers through a catalog of more than 400 APIs. Our expert team offers consulting and regulatory compliance solutions, including anti-money laundering tools like SAB AT. We also prepare clients for future regulations, such as PSD3, PSR, and FIDA, to ensure they thrive in the evolving financial landscape. Contact our experts for more information.
Read our white paper on the evolution of Open Banking in the US and EU