Open banking is not making as much progress as it could in Switzerland. A new study indicates that some institutes are building barriers instead.

Open banking should be fun. At least that is what the authors of the «IFZ Open Banking Studie» (German only) say.

But reality seems to be pointing in a different direction. That is what the results from talks with 21 banks, fintechs, insurers, and other financial institutes indicate. At best, banks are lukewarm about opening their platforms up to third parties. «The fear of losing the client interface is the largest hurdle for open banking», they maintain.

The potential of being overtaken by a third party is a deep-seated fear. It is like losing a job to technological progress. A big wall quickly forms in the head of the average banker. The study also seems to back that up, noting the prevalence of a conservative, discreet and cautionary mindset.

Many Trends Point in the Same Direction

But they won't be able to avoid open banking forever given that many trends are pointing in the same direction. The shift of computing and software power to the cloud, and the increasing importance of digital interfaces and artificial intelligence. From a strategic perspective, open banking is an opportunity to link up with other service providers in the wider ecosystem in the hope of giving the client a more complete service and increased scale.

Then we have big tech lurking in the background, which moves far more quickly than financial institutions do and are likely to be far more willing to link up with third parties.

Driven by Regulators Abroad

In the UK, the trend is being driven by regulators through the Open Banking Implementation Entity (OBIE). The EU introduced the PSD2 guideline in 2018 forcing the banks to make their IT capabilities and channels available to third parties. But here any steps in that direction rely on the financial sector alone.

After initial difficulties, the Swiss Exchange (SIX) has managed to position itself as a connection hub with its bLink service between banks and third parties and it now works together with Open Wealth, an association striving to establish open banking standards in the wealth management industry.

But the study concludes that Swiss banking is underestimating current developments. It is seen as a technological issue and not understood as a strategic challenge. On the IT side, open banking quickly devolves into a question of interfacing, and the fact that it requires a fundamental change in banking technology is completely overlooked. In short, the matter always seems to be delegated downwards, not up.

Contradictory Behavior

All banks do agree that client needs should come before anything else. That is where the study points out the largest contradiction in their current behavior.

«If banks really want to meet the needs of their clients, they will eventually come to the strategic conclusion that it is only possible to keep their trust in the long-term when they help them find their way and move - safely - through the new possibilities that the future brings», the authors indicate.

That requires being open to third parties that can provide the right services. Banks have to make sure that the activity takes place in a safe environment. That will also engender a great deal of trust with clients as it will help them to deliver services in areas that are not part of their core competence.

Slow and Trustworthy

«Swiss clients tend to be rather slow and trustworthy.  But it will be increasingly important for such clients to get high levels of service and feel appreciated in the medium- and long-term», the report states.

But the authors also warn that Swiss banks do not have the technological and financial means to compete with big tech. That is why cooperation is such a useful tool as a way of supporting effective solutions, the authors maintain. But they don't see much of that happening right now except in isolated cases with a few smaller regional banks.

A New Mindset

But banks won't deviate from their current solutions by «even one iota», the report concludes. A bunch of different qualities could mitigate that, and the authors hint at what would be a far better mindset for bankers. Being innovative, flexible, open, and agile.