Major Opportunities Open Banking Adoption Brings

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Each year, the interaction of devices and software applications becomes better. The idea of open banking is to ensure improved interaction between banks and financial services companies. Open banking is a set of solutions and processes that allows you to get complete information about customers. How does it work? The banks are now obliged to allow third-party developers to effectively integrate banking services with financial and non-financial applications and services.

Obviously, the Open Banking initiative is not about developers. The goal of this innovative approach is to expand the range of customer opportunities. Fintech companies are able now to access banking data to develop new applications using the latest technologies. Thus, customers will get next-gen solutions allowing people to save money, simplify lending and make payments easier.

Open Banking is aimed to deliver banking services closer to customers. Today, banks and fintechs should unite their efforts to provide better services and stay competitive. What are the opportunities?

More choices

You have probably already used some of the services that work through APIs. For example, some personal finance management apps can analyze your bank account data and provide helpful advice on how to better manage your expenses. With the help of Open Banking directive, fintechs are now able to develop the applications that allow customers to make payments from their accounts in different banks. Such capabilities attract many consumers as there is no longer a need to sign in in each of your accounts. Instead, you can use one application for checking all your accounts.

Faster lending

Open Banking will greatly simplify applying for credits. When applying for a home loan or car leasing, you no longer have to fill out an application on the website or in Internet banking systems. With an Open Banking system, you can request a credit offer from each of your service providers without doing much paperwork. All your accounts and transactional data can be checked in one place. You as a customer can compare offers and banking products more easily. Open banking improves customer experience as even businesses will be able to apply for credit following a simpler procedure.

Security

Although cybersecurity is one of the main challenges banks face nowadays, only customers will decide on which data they would like to share with third parties. Without your consent, a bank can't share your data. However, banks together with fintechs are already taking steps to strengthen cybersecurity measures. According to Ey, these measures include the following things:

●      Stakeholders (and even competitors) need to collaborate to build a highly secure ecosystem for their clients. For example, shared services like KYC standards can be developed and used as a trusted tool by all the parties.

●      Customers should be provided with greater control over their data, which means that they will understand better how open banking works.

●      All parties can leverage the potential of new technologies like artificial intelligence to improve security. AI-powered solutions are used to track customer activity and detect any suspicious actions.

●      Authentication techniques must be improved. Technologies like face recognition, touch ID, fingerprint, etc. are being actively used to enhance authorization and provide customers with more tools to protect their accounts.

Benefits of Open Banking

Let's some it up and make a list of benefits open banking brings to both banks and their customers:

1. Serving customers better and putting them to control how their data is used.
2. Opening internal bank data and processes to other companies via different digital channels.
3. Increasing the competition and allowing for the creation of new products.
4. Developing public solutions with lots of new possibilities and opportunities.
5. Accelerating innovation in the banking sector.
6. Extending the target audience and entering new markets.
7. Increasing customer base.
8. Improving customer experience.
9. Building new partnerships.
10. Building an entirely new banking ecosystem.

Open Banking will definitely reshape the ways people manage their money. It continues making changes in regulations and technology. Today, consumers have already evaluated the possibilities to manage all their accounts in one place. Many businesses that are not banks but have expertise in the banking industry have got the opportunity to provide these and new services to a bigger number of clients. Lending has become easier as loan providers can now see and study your financial history if you permit this. Open banking gives the world three main benefits, which are convenience, control, and competition. The key to the success of Open Banking technology lies in combining open source and shared data with traditional databases.

Final Words

Today, incumbent banks need to focus on relationships. Retailers know that they cannot rely on the traditional ideals of brand loyalty. Many of them work on developing their marketing and communication strategies in order to adapt to the consumer demand for better experience. In banking, everything is completely different. Consumers often remain loyal to banks, even if they are dissatisfied with their services because it is difficult for them to find out if another option is better. In this regard, till now, banks had no powerful incentives to spend time and effort on retaining good relationships with their customers.

With the new regulations, it will become easier for consumers to compare the services provided, and for young fintech companies to enter the market. Traditional financial institutions will have to make more efforts to retain customers. New tech market players will have little time to gain trust and prove that their approach is more customer-oriented.