Open Banking Outlook
As telecommunications continue to advance and financial institutions become more closely connected, open banking and the use of application program interfaces (APIs) will become more prevalent in customers’ day-to-day lives.
The practice of open banking facilitates the sharing of data between financial institutions—including community banks and credit unions—and third-party fintech apps and software. This is meant to serve both customers and banks at the same time.
As your financial institution looks to the future, it’s essential to understand how open banking works and its advantages.
The Benefits of Open Banking
Open banking equally serves banks and customers alike.
Financial institutions can quickly access what data they might need for essential functions such as processing new customers, approving loans, and refinancing. It also allows banks to efficiently share information with different departments and associated financial institutions. The process comes with a significant amount of built-in security, so customer data is not put at risk.
This combination of efficient, comprehensive communication between institutions and high-level security means greater access to the global financial world.
For consumers, open banking simplifies a great many things. Many find themselves managing a multitude of accounts and finance-related tools, including credit and debit cards, various insurance policies, retirement accounts, mortgages, business loans and accounts, and more. To make matters more confusing, many customers hold these accounts and tools with more than one institution.
Understandably, many customers have grown tired of logging into multiple account portals to view accounts, make payments, and conduct other business.
Open banking changes that.
Now, customers can link accounts, share data with financial advisors, and pay bills more quickly. Should individuals wish to apply for a loan, they can quickly transfer the necessary data directly into the loan request forms, even if it requires information stored at separate banks or other institutions.
How Open Banking Ushers In the Future
How is open banking changing how people and institutions manage finances?
- Multiple Account Management – APIs allow customers to view and manage various accounts located at different locations through a single interface.
- New Account Creation – Open banking will enable customers to open new accounts with greater ease and efficiency. Financial institutions, in turn, can use this process to effectively gain more information on new account applicants. Furthermore, new online accounts are approved, opened, and used more quickly, with less work required by bank employees.
- Subscription Management – A growing issue with many consumers is the creep of accounts for everything ranging from streaming entertainment to utilities. Open banking makes handling recurring payments, notifications, subscription management, and service cancelation more streamlined by ushering them all through one interface.
- Instant Credit Risk Programs – When customers apply for loans, lines of credit, or similar services, they must allow the bank or credit union to access them. Instant Credit Risk programs allow lenders and other institutions to receive an overview of the customer’s credit history to make decisions swiftly—saving both customer and lender time and labor.
- Many Options for APIs – There is no shortage of apps and software available for banks and customers to leverage open banking to their advantage. Some popular examples include:
- Afterpay
- ApTap
- Authent
- Onfido
- Plaid
- Subaio
- Tink
- Zip Pay
Get Started with Open Banking
Open banking is convenient, safe, and, most importantly, available for financial institutions looking to remain competitive in the world of global finance. Even local institutions, such as community banks and credit unions, stand to gain with efficient, secure sharing of information to help meet customer needs and streamline in-house operations.
To learn more about open banking, APIs, and how this could call benefit you, contact L. Michael Wofford Consultants & Advisors. We will help you evaluate your operations, services, customer experiences, and expectations so we can determine how open banking can best serve everyone.
