Open Banking: Growing in customer trust in 2019

Over the past year of its implementation Open Banking remains a key concern of banks given the regulatory environment, the changing consumer patterns and the new fintech firms. It is becoming a need for banks to embrace digital transformation in this area to achieve more profitable operations. The banking industry is looking to achieve strong …

by | January 22, 2019 | Profile Software

Over the past year of its implementation Open Banking remains a key concern of banks given the regulatory environment, the changing consumer patterns and the new fintech firms. It is becoming a need for banks to embrace digital transformation in this area to achieve more profitable operations.

The banking industry is looking to achieve strong customer authentication, consent and reliability as required by PSD2, Open Banking and GDPR. This is supported in the report by PwC and the Open Data Institute examining the first six months of Open Banking in the UK, where researchers found that by 2022 the country market could be generating £7.2 billion in value.

As Open Banking allows customers to share access to their financial data with non-bank third parties, there are concerns by incumbent banks. Do banks see the Open Banking platform as a transformational opportunity to play a leading role by creating new service propositions combining predictive analytics, artificial intelligence and financing to expand their reach to new customers or is it perceived simply as a compliance burden for them?

By the end of 2018, according to Splendid Unlimited research in The Independent newspaper in November, only in the UK there were 9% of people who have used open banking services. Customer’s education was highlighted in EY’s UK FinTech Open Banking Snapshot, as one of the biggest challenge, therefore becoming a top priority to make open banking a success. However, this seems to develop well ahead without negatively affecting consumers. With consumers in their 20s and early 30s becoming more and more receptive towards banking services offered by non-financial services companies, open APIs come at an opportune moment for technology giants like Google, Amazon, Facebook, Apple and others — providing wider access to consumers’ financial data (currently held by banks) and allowing these firms to restructure their strategy towards expansion. [as mentioned in The Financial Brand].

Banks can leverage the power of open APIs to compete with both small and big fintech providers beyond the regions where regulations regarding open banking and shared APIs have been implemented. Banks can embrace open banking APIs by innovating in their existing product range. They can identify customer expectations and deliver a more personalised banking experience, enhancing customer loyalty. 

According to Deloitte’ s research on Open Banking: How to flourish in an uncertain future banks are suggested to:

– Invest in capabilities to enable data collection, analysis, and decision-making based on data insights. Focus on innovative use of customer data in a more personalised proposition.

– Reshape organisational structure and culture from the top down. Innovation will need to be placed at the very heart of the business and be encouraged at all levels of the organisation.

– Adapt to the agile way of working with FinTech and technology firms.

In addition, research from the Digital Banking report shows that Open Banking and expanding use of APIs was of significance importance both last year and as a growing trend this year, ranking on top 3 position. Financial Institutions can leverage the power of open APIs as customer patterns are changing and this can become beneficial to the bank through careful positioning or fruitful partnerships fostering innovation.

In 2019, it seems that the financial services industry will experience more changes with the main priority always being that consumers should receive enhanced digital experience. Given the changing patterns, the business objectives and regulatory environment, banks would need to deploy data analytics capabilities, invest in innovation, and security whilst realising that partnering with fintech firms or diverting in this sector might provide the required elements to look at open banking and APIs as a growing opportunity. 

“2019 is set to be the year Open Banking really takes off, but this won’t happen without all UK banks continuously improving the quality and availability of their APIs. Only then we will be able to see the real impact as more consumers benefit from the initiative,” Yolt’s Chief Operations Officer Leon Muis said, as stated in Finextra.

Profile’s extensive experience in the Banking industry pioneering with Fintech, mobile-first as well as innovative platforms for digital experience can successfully support these evolving market trends. FMS.next Suite, the company’s cloud-enabled, PSD2-ready, Digital Banking solution, delivers advanced capabilities to international Digital banks and Fintech firms that result in superior user experience and business agility for both professionals and end users. FMS.next has more than 250 API calls which effectively support Open Banking. FMS.next also includes a PSD2 specific solution that enables payments across the platform.

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