How open banking can drive competitive advantage

The paradigm shift from private data to open data through a tech-based usage of APIs, enabling third-party developers to build their applications and services has been a milestone in new age banking. It took a great deal of homework and a policy level metamorphosis for the legendary banks like Bank of Ireland, HSBC, and Lloyds, to mention a few, to open up their data. The PSD2 (the second Payment Services Directive) authorizes the use of financial data held by banks in a standard, safe and secure manner. Banks can capitalize on open banking and stand to gain competitively by strengthening their digital core.

Giving customers the power over the money banked

Monetizing the API-driven open banking agenda is possible by enhancing UX and driving market share. Digital banking companies instead of yielding to open banking services by statutory compulsion must come forward to welcome it. They can optimize the process by building healthy internal communities and strengthening intra-organization IT resources for the purpose and also by engaging with external communities like API builders. Many banks in Singapore and the US have also successfully housed open banking, willingly as a competitive advantage rather than as a compliance requirement.

The Genesis of BaaS (Banking as a Service)

In the years of its infancy, banking customers were familiar with PFM (personal financial management) tools which required a cumbersome and insecure process of screen mapping and entering of financial credentials in third-party sites. Open Banking has made organic changes to this scenario and now banks can gain the goodwill of customers by making hundreds of financial services through the bank swift and secure. For example, the complicated process of obtaining the loan from financial institutions after extensive documentation can now happen across the digital window, with lending institutions directly accessing your financial data.‚Äč

Adopting the technology-first approach and creating open banking-conducive ecosystem

From the seismic impact of open banking in the UK, world nations are following suit and are optimizing their existing infrastructure to create APIs for cross-departmental collaboration. The Australian Government has introduced a phased approach to unlocking third party access to consumer financial data, like a debit card, credit card, and mortgage data. With the fintech investment in the country ebbing over $600 million, open banking is the main catalyst for the investors to earn a competitive ROI. Around 75% of banks in Europe find open banking services as the driving factor of digital transformation.

The use of open-source technology by digital banking companies is a welcome initiative that can make open banking work for them profitably. By allowing third-parties access to the financial data of customers in a safe way, banks now offer more value to their clients. Customer experience increases by leaps and bounds. Realizing this trend banks are now hell- bent on digitizing themselves which is the much-needed catalyst for successfully adopting open banking services .


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