5 minute read 17 Dec 2018
City The Hague Netherlands

How innovation can accelerate adoption of open banking in the Netherlands

Authors

Jeroen van der Kroft

Ernst & Young - The Netherlands Financial Services Advisory Associate Partner

Transformation leader helping clients transform and sustain improved business performance.

Pieter Kuijsten

Ernst & Young – The Netherlands Financial Services Advisory Manager

Passionate about innovative technologies. Eager to take others along on the journey to disruption in the financial services industry.

5 minute read 17 Dec 2018

Regulatory delays and consumer trust are hindering the open banking rollout in the Netherlands. How can Dutch banks fulfill their potential?

This article is part of our Open Banking Opportunity Index.

So far, the story of open banking in the Netherlands is one of unfulfilled potential, with the country sitting in seventh place on EY’s Open Banking Opportunity Index, and sharing sixth place in terms of the regulatory environment. Among the main stumbling blocks are regulatory delays, which have created significant uncertainty for Dutch banks about exactly how open banking will play out in the Netherlands.

open banking opportunity index netherlands ranking

The European Union’s (EU’s) second Payment Service Directive (PSD2) is the regulation that underpins open banking across Europe.  While it has been implemented in many countries, regulators in the Netherlands have been slow to transpose the directive into local law. Initial timelines laid down by the Dutch Ministry of Finance were missed. 

Much of the delay is due to difficulties reaching agreement between banks, the Data Protection Authority (DPA) and other stakeholders on key aspects of the rollout, particularly around data privacy, consumer due diligence and the conflicting priorities of PSD2 with the General Data Protection Regulation (GDPR). In December 2018, the Dutch Senate finally approved the legislation, with the expected date for implementation now 1 January 2019. 

The passing of PSD2 into law should help accelerate open banking, although a current lack of consistency around application program interface (API) frameworks across Europe may still slow down the pace of progress. This is not a concern specific to the Netherlands – initiatives from European regulators to standardize APIs across the continent would be welcomed by many EU countries that are also experiencing challenges in realizing the potential of open banking. 

Regulatory certainty and standards should help incentivize more investment in open banking initiatives, and may also help overcome the other big barrier to accelerating open banking’s potential in the Netherlands – consumer concerns. 

open banking consumer sentiment netherlands

Consumers will need to be convinced of open banking's benefits 

Dutch consumers are digitally savvy and relatively early adopters of technology. Our Index of customer adoption potential for open banking found consumers in the Netherlands ranked halfway - in fifth place.  

Consumer adoption

78%

of smartphone users in the Netherlands have adopted mobile banking, with more than 70% using multiple financial services products.

Despite, or perhaps because of their high degree of digital use, Dutch consumers are wary of some aspects of open banking, according to the consumer sentiment research conducted for our Index. 

Dutch consumers are primarily concerned about what open banking means for them in terms of data protection. They are also worried about cybersecurity, and express skepticism about the need for, and benefits of, both consumer control and choice. 

consumer sentiment insights netherlands

Fears over privacy and security have been fanned by recent Dutch media coverage and not helped by indecision from regulators around just how to address data safety issues. Getting Dutch consumers past the trust barrier will be difficult, but important for open banking’s future adoption. The question will be whether Dutch banks can inspire trust through innovation.

Sharing financial data

18%

of digitally active Dutch consumers are comfortable sharing transaction data with FinTechs in return for better services.

What will the killer open banking app be? 

Dutch consumers have shown willingness to share information when the payoff is perceived to be worth it. Social media use is high in the Netherlands. The country has been home to innovative financial services apps such as Tikkie, an app which lets friends repay small loans quickly and has attracted more than 3 million users (about 20% of the population) in just two years. It is likely to be a similar “killer app” that leverages PSD2 and convinces Dutch consumers of the benefits of open banking. 

Developing killer apps required innovation.  Our research found the Netherlands comparatively lower down the Index on innovation, but we see many signs of strong progress on this front. In particular, collaboration between banks and FinTechs is growing and boosting innovation in the sector. Notable recent examples include: a partnership between ING and a British firm Funding Options to launch a platform that helps SMEs compare different funding options; and a partnership between Dutch private bank Van Lanschot and German FinTech Fidor, which allows Van Lanschot to leverage Fidor’s open APIs to offer customers a better payment experience.

For FinTechs, partnering with a bank is the easiest route to high customer volume while, for banks, these initiatives are part of a wider strategy to build, buy or invest in innovation. As many Dutch banks move on from the risk and regulatory projects that dominated focus in recent years, innovation is a bigger priority and institutions are considering how to best transform for a digital future, which will include open banking. 

Preparing to compete in this future will require banks to develop a clear strategic path, by first determining just which role they will play in an expanding financial ecosystem, enabled by open banking and powered by technology. Banks will need to provide innovative products and services that win over consumers, or excel in outstanding customer experiences.  Others may focus on providing banking operations and technology. However they shape their digital future, Dutch banks will need to embed flexibility into their business model, and be prepared to adapt and innovate in response to the evolution of open banking and the new competition it brings.

Can Dutch banks drive open banking adoption? 

The anticipated January 2019 implementation of PSD2 is a positive indicator for the accelerating adoption of open banking in the Netherlands. But this will need to be accompanied by initiatives from European legislators to introduce consistency around API standards and clarity on key regulatory sticking points, including customer due diligence around PSD2 services and the inter-relationship of open banking and GDPR. 

Once regulators have done their part, it will be up to banks to drive their digital future and create innovative new financial products. Only then can they convince Dutch customers of the benefits of open banking and maximize its potential across the financial sector and beyond. 

Author contribution by Jeroen van der Kroft, Associate Partner EY Netherlands, and Pieter Kuijsten, Manager, EY Netherlands.

  • The EY Open Banking Opportunity Index assesses the conduciveness of open banking to thrive across 10 selected markets. Success is viewed as the potential for consumers to adopt open banking-enabled services within a market.

    Our model uses a wide range of measures — 22 indicators and 13 sub-indicators — to assess each country’s potential, across four key conditions needed for the success of open banking: regulatory environment; adoption potential; consumer sentiment; and innovation environment.

Summary

The potential for open banking in the Netherlands will depend on the implementation of the Payment Services Directive (PSD2) in January 2019, and the ability of banks to innovate and win over consumers. Regulatory certainty and standards should help incentivize more investment in open banking initiatives.

About this article

Authors

Jeroen van der Kroft

Ernst & Young - The Netherlands Financial Services Advisory Associate Partner

Transformation leader helping clients transform and sustain improved business performance.

Pieter Kuijsten

Ernst & Young – The Netherlands Financial Services Advisory Manager

Passionate about innovative technologies. Eager to take others along on the journey to disruption in the financial services industry.