The constant innovation and up-gradation of technology have already started a huge revolution in all the business sectors. When it comes to keeping savings in a bank account, people were quite skeptical about trusting the banking bodies even around a decade back.
However, with the support of AI and tech-geeks, internet banking and online payment gateways are already ruling our daily lives highly.
Previously, we were not ready to accept open banking facilities. Now that we have started relying on its services, we keep on expecting more from these digital financial products. Even though it is having a long path ahead of it and is still at a pretty fundamental stage, what can we expect from open financing?
Let’s dive in deeper and find it out!
The Journey from Open Banking to Open Finance
The facilities offered by open banking have gained the customer’s trust to a reputed level through their services. That is why people don’t feel the need to think twice anymore before sharing their transaction details with a third party these days.
This is what boosted the API economy exceptionally. Fintechs and Financial Institutions got the chance to share the transactional details with each other through a secure pathway. As a result, the consumers can get an integrated form of their financials with just a single click.
According to a study, it is expected that by the end of 2022, the new features of open banking in the UK will yield more than £7.2 billion of revenue. The constant maturation of the API system along with a global upsurge in open banking norms has led to a new era of digital banking. It is further pushing the traditional banking methods to double their efforts in the incorporation of digitalization.
Open banking is acting as a suitable catalyst for a varied range of cases such as:
- Opening new account digitally and verifying the KYC
- Aggregation of account
- Management of personal finances
- Self-regulating accounting in case of business accounts
- Providing pre-estimates
- Prompt options to make payments
More than 2.5 million UK customers did opt for open banking facilities in 2021. Amidst them, one million started using these products in between the months of January-August 2020. Another notable thing is that API calls increased from 66.8 million in 2010 to almost 5.8 billion in 2020.
But why push the opening banking system more even when it is booming so well right now?
Because the financial sector is still a lot aback from witnessing everything.
The open banking users from the UK and EU can view only their payment details and that is not enough. Besides that, not many financial institutions are acquiring capital on emerging data-sharing options. In some cases, it is mainly due to technology disruptions and in some, it is for the unwillingness to accept the alterations.
Some of the banking bodies are still sticking with alternative credit data in case of decision-making even when better options are available to them. Whereas some are neglecting crypto trading, POS lending, and digitized wealth management systems which have already gained prominent recognition from the customers.
Open banking keeps on offering the benefit to jump from one financial facility to another and consumers do tend to do that a lot. Therefore, none of FinTech has maintained a consecutive dominating position since the time of their launch.
Consumers expect more digitalization of financial services and they hardly do face any trouble in finding a remedy for a certain need.
Open banking has pushed the FIs to transform into a multi-brand convenient store by now. Whereas open finance offers the headspace for them to convert into platform business.
What is Open Finance?
In the early times, most of the financial matters were handled by the bank. Be it the collection of pension or finding out about the loan approval, rushing to the bank was the only solution available. Also, there were not many facilities which they could physically offer to the customers without seeking it from the higher authorities.
Open finance is based on data-sharing regulations and that will permit the bank to provide a varied range of services to the customers which are appropriate especially for meeting their needs.
This opens up a huge range of possibilities for the clients and they can gain access to several options such as:
- Pension funds
- Credit
- Private mortgages
- Insurance
- Investments
- Savings systems
It will provide the customer with the power to utilize and control their money more effectively. The banking bodies can team up with different providers to deliver a varied range of facilities on the basis of consumer data.
Banking with Open Finance
While technology and AI were going on making amazing progress in every sector, the old-fashioned online banking facilities were making the consumers feel more disgusted with its poor services. But finally, you can get done with all the chores on one platform. From trading, bill payment, wealth management, pension plannings to every other financial service will be done with just a few clicks.
The facilities which awe the consumers quite often end up to be a trouble for the banks. Incorporating third parties for providing a wide range of services to the customers is often assumed to be a costlier process for the banks.
The main appeal of open financing service is that you do not need to build a product from the start.
Instead, you can:
- Team up with a service provider which will allow you to deliver better solutions to the consumers and in the meantime, you can share the profits
- Occupy your domain with offers from service providers
- Work on improving the customer value by incorporating advanced analytics
There is an ample range of possibilities which will ease the work of both, the banks as well as of their customers. Getting access to more facilities will improve the customer satisfaction and will also make them less price sensitive. Therefore, it will definitely lead to a boost of the corporate revenues too.
What’s the Hurry for Open Finance Now?
Platform businesses such as the eCommerce platforms to the third party non-banking apps, each of them attract the consumers by offering them with flawless multi-product experience. But banks are still struggling to even gear up the fast money transfer options.
The payment options are totally dedicated to FinTechs. The banks will end up losing more if they don’t team up with third-party service providers soon. Besides making more profits, they can easily manage to allure the consumers with low-risk services in a more customized way.
The Bottomline
It gets pretty hard for banks to provide seamless services to their consumers if they don’t adapt themselves to the new possibilities. The clients do switch to the better options which are easier to handle and are time-efficient too.
Incorporating technology can be a complex step. But once the integration process is done, it slowly becomes more of a habit. The banks are having the customer data as well as the market details at the tip of their fingers. It is just high time to use it for a good cause and improve their services by gearing up on the technological side. Seek guidance and suggestions and utilize the services provided by Primid Fintech to offer a satisfying experience to your consumers.