What does open banking mean for consumers?
Open banking was introduced as a way for banks to securely release their customers’ data to third party providers and each other, such that consumers can get a better deal on financial products.
Open banking was intended to improve the overall customers’ experience when buying financial services by forcing the banks to be more transparent and more innovative since they would now have to compete with fintech startups and other banks that have their customer information.
In the end, it would result in a better experience for the customer.
Is open banking a threat or an opportunity for traditional banks?
For a very long time now, open banking has been mainly seen as a threat to the long-serving high street banks, since they are now forced to do things in a way that they were not familiar with and are far more susceptible to competition both large and small.
Regulations around open banking will soon prove to be an opportunity for the broader tech giants in Amazon, Google Facebook and Apple to access customers financial information that has long been held by banks, making this an even more significant threat to traditional banks than the fintech startups that they have currently held off so far.
But on the other hand, it has handed banks a major opportunity, to build an even stronger relationship with their customers by helping them manage their finances better, and providing them with access to more suitable and tailored financial products rather than just saving and spending money with them.
A common and simple use case of how banks can use open banking to enhance their customer relationship is to aggregate data from other providers and bring it all into one mobile app for their customers to efficiently manage.
Banks can use this data from all the consumers’ accounts and provide the customer with insights into their finances, or use the analysis from the data to upsell or cross-sell them onto more complimentary products that benefit the customer.
Open banking is also an excellent opportunity for banks to go ahead and partner with other fintech businesses (small and large) to come up with better ways to serve their customers.
Banks should not only use the APIs because they are being forced to, but they should furthermore enhance their own developer platforms to leverage both internal and external web and mobile app developers that will use predictive analytics, and artificial intelligence to create new and innovative products and service propositions.
Thus, that will serve as not only revenue streams for the banks but also a better experience for their customers.
- improve the UX of their apps
- Compete in the cool factor
- Banks are becoming tech companies
- Leverage open innovation to tap into external resources
- Forget that consumers will just come and stay, they can now easily switch
- Use it as a chance to capture market share
How can fintech startups take advantage of open banking?
Open banking is meant to enhance customers’ banking experience in different ways. It requires large, established banks to be more competing with smaller and newer banks, ideally resulting in lower costs, better technology, and also better customer service.
Open banking regulations need banks to publish, both online and inside their branches, accurate and unbiased information that lets consumers decide their service quality, a move towards transparency created to encourage banks to provide the best feasible customer experience.
Banks also have to inform their customers about unforeseen overdrafts and offer them a grace period to fix the issues and avoid overdraft charges.
By relying on networks rather than of centralization, open banking helps financial services customers to share their financial data with other financial institutions securely.
Benefits involve more easily transferring funds and relating product offerings to generate a banking experience that completely meets each user’s requirements in the most cost-efficient way. Open banking is also called “open bank data.”
The viable choices have left traditional banks in a state of vulnerability, and the banks’ legacy and stories may not appear as a rescue when it comes to winning the next generation customers.