How Open Finance APIs Accelerate Digitalization in Banking
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 and open finance can be defined as the standard for API based data-sharing model that banks and other financial company use.
Open finance refers to a wider range of data and services than what is offered by banks. With your consent, financial data related to pensions, tax, and insurance could all be accessed by a trusted third party. This opens up opportunities for more customized consumer services, including payments and other financial products.
Open finance is here to stay and can generate new opportunities for digitalization in banking, opening the door for a wave of innovations. Learn what open finance could mean for your business and customers in this article!
Open Finance to accelerate data sharing and financial inclusion
Open finance is the next step of open banking evolution, It 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.
However, it is still in its infancy, but it opens a path forward for fintech expansion in the future. it gives customers more control of their data, but it also allows the financial industry to develop products and services tailored to customers’ financial needs.
Open Finance is One of the Banking Digitalization Pillars
As one of the pillars of digitalization 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 markets. More and more markets are finding the best ways to enhance their capabilities 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 leverage and provide their customer's 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 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 financial company can proactively enable open finance and open access to the data sets.
This will allow economies to leverage faster while juggling the challenges during the pandemic. Fintech companies, banks, financial company, and consumers will continue to provide considerable advantages to businesses and customers.
Open finance has been adopted extensively in Europe, Australia and North America has a different perspective on what consumer-permissioned data sharing will look like in the future. With open finance regulations becoming more prevalent in the U.S., from market-driven to government mandates, we are entering the next phase of secure data sharing.
Open Finance Opens up Opportunities for Financial Institutions
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, mortgages, personal financial management, and payment services. The biases that are inherent across the industry can also be reduced. it also 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, 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
The benefits of open finance are not limited to banks or other 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 accommodate the 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 allows any financial institution 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 ability to access and control 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 transparency. Being able to access more information will lead to better financial decisions.
The potential benefits of this online digital banking for your business are too great to ignore. Financial institutions can meet the new demands of their customers and aim to achieve high levels of growth over the following decades.
Ayoconnect is a top Open Finance platform for Southeast Asia that gives fintech companies and financial institutions the infrastructure and data products they need to use consumers’ financial data from many sources throughout the region to create the future of financial services. 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 digitalization in banking, 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, banking was merely the start. Visit Ayoconnect now to learn more about this largest open finance platform for Southeast Asia!