What Is Open Banking:
Open banking is a term used to describe an initiative that promotes a more competitive marketplace for financial institutions. As banks compete to provide the best customer experience, they are challenged to provide more than a series of products, which is the standard practice today. Another core focus is openness as well as transparency. Open APIs will enable third parties to create secure applications and services that interact directly with consumers, providing unique opportunities for the public to understand their finances and make more informed decisions.
How Can You Benefit From Open Banking:
Open banking is a game-changer for the financial services industry and presents big opportunities to digital financial services companies to acquire customers and deliver their service at a lower cost. The consequence of being at a disadvantage compared to the financial institutions will be a higher loss of customers. If a customer finds another service that offers him a better deal for his needs, he may choose that service over his bank. In other words, open banking helps financial institutions to compete with competitors by not competing on the same level playing field. There are several possible benefits to financial services companies when they adopt open banking like increased customer loyalty.
What’s Next For Open Banking:
An open banking marketplace will now enable access to bank and credit union customer information from third-party services. To do this, consumers will need to create new accounts and give permission to the third-party service, potentially if the service will offer new features such as enabling payments to other accounts.
This makes it easier for third-party companies to enter the banking marketplace, but there are some risks involved. The consumer should be aware of what type of data will be shared, how it will be used, how to find out if they have been affected by data breaches, and how to protect themselves.
Next-generation technology has transformed financial institutions over the past decade. Now, account holders are able to open a web-based platform to request a trade, set a new credit limit, monitor their account activity, and more. This paradigm can drive industry-wide change. The adoption of these new services may be challenging. With new tools and capabilities, the technical team needs to re-evaluate its operating model, learning curves, and internal governance. For banks to meet the expectations of their customers, the biggest hurdle that they face when moving to next-generation technologies is the ability to automate self-service into their entire bank culture.
Written by Ishmita Vaish