Open banking and, taking this a stage further, open finance enable banks to meet the demand for innovative services early on and to offer them with minimal effort. By integrating third-party services into an open architecture using interfaces, financial institutions can offer more personalized products and services to a broader audience, and therefore open up new sources of revenue.
The term “open banking” does little to promote the benefits of an open ecosystem for banking customers; after all, customers should not only be able to access all their accounts via a single application, but also use third-party services. The term “open finance” is better suited; regarded by many as the “new open banking,” it allows customers to manage and shape their entire financial life via an app. Roisin Levine, Head of Banking at Fintech Flux, is clear on why consumers are often reluctant to surrender their data in exchange for personalized services: When banks and their partners talk about open finance, customers don’t always understand the benefits that are marketed. For them, open finance has nothing to do with API management or defining standards to exchange data. Instead, it means tangible, day-to-day things, such as seeing the receipt of the fast-food chain in their banking app right after they have lunch, or the ability to compare insurance policies and purchase one immediately, or the ability to change electricity supplier with just a few clicks.
Once banks start to market appealing services extensively, customers will soon find them so convenient and practical that they will be willing to pay for them. Moreover, banks that use an open finance platform to integrate third-party providers with a wide range of products can automatically evaluate their customers’ data so they can then recommend the services that best suit their customers’ current situation. Banks can then monetise these services through third-party fees.
An open banking architecture opens up a wide range of use cases that can be tailored to respective customers. When banks transform themselves into agile organisations, they increase their viability; they can leverage innovative products and services and integrate them into their portfolio. As a result, they can meet customer requirements fast, conscious of users and without the need to spend a lot on personnel and technology. With our Digital Banking Hub as a platform, financial institutions can create an open ecosystem through which they can deliver all kinds of open banking and open finance.
At our online conference Open Innovation Day 2020 on 16 September, you can learn more about how to respond to your customers’ digital customer experience requirements. Register now and join the discussion!