Most financial institutions are not ready for open banking, but the tedious task of prepping bank platforms can be streamlined with AI.  

Three-quarters of banks are not operationally ready for open banking, according to the 2024 Digital Banking Experience Report released May 16 by Sopra Banking’s IT services provider, Sopra Steria. Along with Forrester, Sopra Steria surveyed 866 senior decision makers in financial services, banking and the insurance industry across the world in May and June 2023, the report stated.

Open banking is a “necessary evil” for FIs, Mathias Mercier, chief marketing officer of financial services at Sopra Steria, told Bank Automation News, adding that it forces banks to improve services or risk losing customers. 

Many financial institutions are still using legacy mainframe and core processing systems, which present hurdles to connecting to other FIs for open banking, Booshan Rengachari chief executive of financial solutions provider Finzly, told BAN. 

“The world has moved on to using iPhones and Android phones, and the banking industry is still on the dial-up phone,” Rengachari said. 

Many financial institutions don’t have infrastructure that can support APIs, which can create problems for sharing data under open banking, Rengachari said, adding that it takes time to change existing legacy systems. 

Although their infrastructure may not be ready for open banking, FIs see the revenue benefits of the system.  

Nearly 45% of the banks in the survey said that they are focused on monetizing open banking, and 37% expect open banking to increase bank revenue. 

AI in open banking 

To keep up with open banking, Fis must invest in infrastructure and “AI is a driving force behind this transformation,” according to the report. 

The report stated that AI can help banks: 

• Optimize operational processes; 
• Create innovative products; and 
• Enhance offerings and improve customer service. 

AI can give financial institutions a leg up when it comes to open banking by improving customer loyalty, Mercier said. 

FIs can use AI to provide better services to customers, like chatbots and account insights, which helps retain them as clients, Mercier said. 

“No one wants to move away from their bank,” Mercier said. However, clients will switch to institutions that have enhanced digital offerings, including open banking capabilities. 

Generative AI can also help smooth a bank’s transition to open banking by improving customer experience, Mercier said. 

“When you call a financial institution, they know everything about you,” he said, adding that gen AI can help customers who want to share their financial data with another institution.