Many markets are now experimenting with the idea of open banking, which has the potential to transform both financial services and industry business models, according to a report from global banking regulators.

On Tuesday, the Basel Committee on Banking Supervision published a report on open banking and application programming interfaces (APIs), which found that many jurisdictions have adopted, or are considering adopting, some form of open banking.

Open banking involves sharing client data from banks with third-party firms to develop new applications and services for clients.

“Increased use of digital devices and rapidly advancing data aggregation techniques are transforming retail banking services across the globe,” the report said, noting that open banking may enable “faster and easier payments, greater financial transparency options for account holders, new and improved account services, and marketing and cross-selling opportunities.”

The report said that the introduction of open banking has the potential to transform banking by enabling innovation, but that it carries an assortment of risks, including threats to banks’ business models and reputations, along with concerns about data privacy, cybersecurity and third-party risk management.

While the approaches to open banking vary depending on a number of local factors — some markets have defined regulatory frameworks, while others are more market-driven — they share many of the same risks and challenges, the report said.

For instance, data sharing creates a bigger target for cyberattacks, oversight of third parties can be limited and liability becomes more complex with open banking given that more firms are involved.

Additionally, the report said, “Banks may face challenges in adopting strategies needed to remain competitive and profitable in the changing digital environment.”

As a result, the report argued that regulators must be attentive to the risks that come from increased sharing of customer data and increasing connectivity between the firms providing financial services.

The report added that the multi-disciplinary nature of open banking may require greater regulatory coordination.