How Open Finance Accelerates Digitalization in Banking
February 11, 2022
The financial services industry has evolved in the last few years. The global pandemic even accelerated the evolution, where we are being forced to move the economy industry online. As another evolution from open banking, open finance can be defined as the standard for a data-sharing model that banks and other financial institutions use.
Open finance is here to stay and can generate new opportunities for the legacy banking system, opening the door for a wave of innovations like artificial intelligence, automation, etc. Learn what open finance could mean for your businesses and customers in this article!
Open Finance to transform traditional banking industry
Open finance plays an essential role in that scheme. It simplifies financial data sharing to enable new, more personalized financial products and services. A customer’s financial data is stored in one place under their permission and control. In other words, they decide what information they want to share.
The first online banking service was launched by Sumitomo Bank In January 1997. And online banking subsequently accelerated the digital transformation of the banking sector by way of mobile banking, which offers essentially the same digital banking services but from the convenience of one’s mobile device such as a tablet or smartphone.
However, open finance is still in its infancy, but it opens a path forward for fintech expansion in the future. Open finance gives more control to customers of their data, but it also allows every bank to develop products and services tailored to customers’ needs.
Open Finance as one of the Banking Digitalization Pillars
As one of the pillars for digital transformation in banking, open finance has the value and benefits to help banks and tomorrow’s leaders. By unleashing new waves of innovation, we can see continued rapid growth in the digitalisation of banking institutions. More and more companies are finding the best ways to enhance their capabilities is to capitalize on open finance access.
According to Bank BRI, this certainly has a positive impact. They experienced digital transaction growth that skyrocketed to 402.6% as of March 2021. Open finance could help banks in improving the customer’s digital banking experience. By allowing any bank to provide their customers’ financial information to third parties, this digitalization in banking can help banks to pursue new distribution channels.
With this innovation in banking, countries worldwide need to adopt the changes quickly. The data and regulatory foundations for open finance are being built worldwide. Some countries will rely heavily on this regulation, while the markets lead others. But banks do not have to wait for the regulation. Any retail bank can proactively enable open finance and open access to the data sets.
This will allow economies to grow faster while juggling the challenges during the pandemic. Fintech companies, banks, financial institutions, and consumers will continue to provide considerable advantages to businesses and customers.
Open Finance enabled financial Institutions to offer digital banking services as their own
Open finance promotes integration, interconnection, interoperability, security, and reliability of payment system infrastructure in the financial industry. Accelerating digitalization in banking also opens up a gateway for collaboration. This can happen between a bank and various companies. With the emergence of this innovation, collaborations can become much easier and faster.
If the market embraces open finance, it can support financial education for every customer and promote inclusive financial access to credit, personal financial management, and payment services. The biases that are inherent across the industry can also be reduced. Open finance puts control back in your hands as a customer and gives the institution the power to make their customers’ financial lives more accessible and less stressful.
In other words, open finance is the next level in the democratization of finance. Consider it to have the potential to transform how the financial services we know of work right now. Not only for the consumers but also the business as well.
Open Finance Provides Better Customer Experience than traditional banking system
The benefits of open finance are not limited to banks and financial institutions only. E-commerce merchants can also provide a better checkout process using payment initiation services. Financial institutions and other supporting industries can build excellent working interfaces to improve their customer experience.
This shows that customer expectations are constantly shifting alongside digitalization in the banking industry. They want a platform that requires minimal effort from the users but does exactly what they want.
Millennials and Gen Z (people under 40 years old) are the current largest-growing demographic. Since nearly every person in that group has experience with computers and technologies at an early age, banks need to engage with this demographic on their own terms. Many Gen Z-ers believe they will not need traditional bank services in the future, and many millennials integrate fintech products alongside their bank accounts daily.
Open finance has allowed many banks and institutions to build a trust-evoking relationship with the group that is skeptical about the established financial system. Digitalization in banking supported by open finance will remove the barriers to communication and collaboration with the entire financial industry.
Customers can also gain better control over their assets and finance activities with an excellent digital banking services platform. They can choose who has access to their financial (or other) data with the transparency of open finance. Being able to access more information will lead to better financial decisions.
The future of finance likely lies within open finance. The potential benefits of this online digital banking for your business are too great to ignore. Banks and Finance companies can meet the new demands from their customers and aim to achieve high levels of growth over the following decades.
Connecting 1,000+ service providers with 200+ consumer platforms, Ayoconnect is a trustworthy open finance provider. We aim to build Indonesian financial infrastructure through various API-based innovative products.
With this new digital disruption, open finance provides a golden opportunity where everyone can take better control of their financial data and information to their advantage. As new technologies are creating innovations, enabling seamless connections, and empowering millennials and gen Z with innovative banking solutions. Visit Ayoconnect now to learn more about this largest open finance platform in South Asia!
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