New Data: FIs Cooling on Open Banking but Still on Course for Real-Time Payments

Open banking is transforming the banking industry. It grants third-party FinTechs access to the financial data and funds traditional financial institutions (FIs) manage. Doing so can pave the way to offering real-time payments. Consumers value the faster payment solutions, but FIs are reluctant to provide these solutions due in part to fears of rising fraud, especially as the speed of payment transfers increases.

PYMNTS Intelligence’s data shows that FIs have experienced increased fraud rates across most payment methods. Half of FIs cite increased fraud related to real-time payments. With the advancing threat, FIs using machine learning (ML) and artificial intelligence (AI) fraud prevention solutions show increased confidence in open banking or real-time payments. For example, 80% of FIs say using AI/ML technology increases their confidence in providing secure real-time payments.

These are just some of the findings detailed in “How Fraud Fears Impact FIs’ Adoption of Faster Payment Solutions,” a PYMNTS Intelligence and Hawk AI collaboration. This report explores how increasing fraud concerns affect FIs’ assessments of open banking and real-time payments solutions. We surveyed 200 FIs in the United States between March 29, 2023, and June 16, 2023, to examine how they perceive the fraud risks and rewards of open banking and real-time payments and the impact of the technology solutions they use to mitigate rising fraud.

Experiencing increased fraud raises FIs’ aversion to open banking by 26%.

Forty-six percent of FIs feel the risks of providing open banking solutions outweigh the benefits. Just 35% of FIs believe the benefits outweigh the risks. Smaller FIs are more comfortable providing open banking, with nearly 2 in 5 noting the benefits outweigh the risks. Conversely, more than half of the largest FIs — those managing more than $100 billion in assets — feel the risks outweigh the benefits.

Most FIs are confident in their ability to provide secure real-time payments.

PYMNTS Intelligence finds that 81% of FIs report they can provide secure real-time payments. Contrary to open banking trends, FIs’ confidence in real-time payments is higher among those with greater assets. Nearly all FIs managing more than $100 billion in assets say providing real-time payments would not compromise security. Just 78% of FIs managing between $1 billion and $5 billion in assets say the same.

Fraud prevention measures increase confidence in open banking and real-time payments.

As fraud and financial crime continue to increase, FIs are reticent to adopt open banking or enable real-time payments. However, data shows using fraud prevention measures increases FIs’ belief in the benefits of providing it. Also, it increases confidence in their ability to provide secure real-time payments. Among FIs leveraging cloud-based fraud and financial crime prevention platforms, 41% say the benefits outweigh the risks. Seventy-nine percent of these FIs report they can offer secure real-time payments.

To provide open banking and real-time payments, FIs of all sizes need to adopt sophisticated tools to win the fight against rising fraud. Download the report to learn how using advanced fraud prevention technologies can balance the benefits and risks of open banking and real-time payments.