Open Banking: Who will really get benefitted?
Banking, as a domain, has always been a competitive one. To keep up with the pace of the dynamic nature of this sector, banks & financial institutions are gradually making the shift to experiment with newer technologies, like Open Banking and innovative concepts like FinTech, designed specifically for the banking sector. The basic idea behind all these innovations remain to offer a better experience to consumers and leverage the choice of integrated systems that are widely available today. Are you OPEN to Open Banking? The impact of technology in making our lives better and smoother can’t be overemphasized enough. FinTech (an excellent combination of finance and technology!) is one such area making the traditional banking system seem redundant with each passing day. The rise of Fintech sector has been exponential in the last few years with Fintech adoption seeing a sharp rise globally from 16% in 2015 to 33% in 2017 on an average. Open Banking API (Exclusively covered as Open Banking API: A Journey, 1st part of this series of 3) is the newest offering of FinTech that holds immense potential to bring about a transformational banking experience to its end users. However, before making the switch to Open Banking, it is essential to understand what the concept is trying to achieve and who will it really benefit? So What’s the Buzz called ‘Open Banking’ All About? With Open Banking, banks are moving to Agile technologies, building strong partner networks, and creating robust mobile platforms which cater to consumer’s needs, thus enabling direct financial transactions between customers and businesses and making cross-platform payments a reality. It works as a systematically designed collaborative model. Here the customer’s banking and other financial information/data is shared to trusted third parties (with the customers’ consent, of course!) through APIs with the aim of offering enhanced capabilities to the users. Thus, Open Banking is a financial services term as part of the financial technology that refers to: The use of Open APIs that enable third-party developers to build applications and services around the financial institution. Greater financial transparency options for account holders ranging from Open Data to private data. The use of Open Source technology to achieve the above. In short, “Open Banking is the possibility of creating new digital business and ecosystems through APIs provided by the banks. This allows customers: To have a greater control over their data Have a better experience in a secure, agile, and future-proof method To generate new revenue streams, and to create a long-term sustainable service model for the industry as a whole. Who will ‘Open Banking’ Really Benefit? The benefits of an Open Banking model aren’t just limited to consumers but extend to service providers as well. It benefits, one and all, associated with it. Benefitting Consumers Among the many benefits of Open Banking to consumers, the most important include:Giving the Benefit of Choice to Customers As a service provider, banks generally offer limited options and the same services to all their customers. Open banking, on the other hand, gives the benefit of choice to customers as they now have the freedom to select from multiple service providers available. It also empowers customers to take charge of their finances and make informed decisions to manage their accounts. Easing Payments with Smart Devices With Open Banking APIs, customers won’t have to wait in long queues to make purchases using physical wallets at stores. The concept will allow emerging technology applications such as Google Pay, Samsung Pay, Apple Pay, PayTM etc. to make payments using digital wallets using your Smartphone or smartwatch. Ease of Remittance and Currency Exchange Increased number of migrants across the globe for better economic opportunities means an increased amount of money to be sent back to their families. Banks have always found international money transfer and remittances to be a painful and expensive process.Instead of paying a large transfer fee to the ‘money transfer businesses’ or facing the lack of proper setup, especially in rural areas, FinTech companies like NDASENDA, have made this entire process extremely simple, smooth, less expensive, and much faster. Thanks to Open API, the money can be transferred, services can be bought and bills can be paid seamlessly by using one single mobile App at the comfort of your home. Various service providers such as We Swap, World Remit, mPesa etc. are offering ‘currency exchange services’, by using Open Banking, in a very secure and seamless way to transfer even minuscule amounts of money overseas. Customized Product Offerings Open banking holds the potential to offer customized and relevant product & service options to the consumers which most banking apps fail to do. Open banking APIs introduce the concept of service personalization in banking to benefit customers immensely. Customers can now have access to multiple accounts in one place. The customers will be able to enjoy the best deals available with greater transparency. An opportunity is here to see your current financial position in a single application on your Smartphone. It is just a matter of ‘single click’. All the financial data at one place gives the consumer the leverage to take quick credit decisions and avail the best deals possible. Open to better offers by credit providers and instant credit and remittance of the same. With all the accounts linked together by an app and available on a single platform, the consumer is ‘all-powerful’ to make a choice in how to pay. This will also bring in some innovative offers by the banks and the financial institutions to make new customers and retain the old ones. It’s raining Profits! Benefitting Banks and Financial Institutions Collaborative Advantage Open Banking gives an opportunity for banks to stay ahead of the competition by letting them explore data-sharing agreements with fintech and other non-financial service institutions. Allows Banks to Be Futuristic The model allows banks to be futuristic by letting them understand both data privacy mandates that exist as well as the likely changes they need to adapt for a better customer experience. Thus making decision-making foresighted and insightful.