Though open banking has been around for half a decade, there’s a new term on the block – open finance. Where open banking is the exchange of data between financial institutions and third parties, open finance is the next step in that journey. Open finance goes beyond the data and services available at your bank, and covers your entire financial footprint, allowing third parties to create even more tailored services.
Many in the industry believe open finance will lead to better financial services overall, we spoke to some of the leading fintech experts to find out what they think.
The future of banking
Chirine Ben Zaied, Head of Innovation at Finastra said: “In an increasingly competitive global marketplace, banks are under pressure to optimise their core processes, increase profitability, reduce the time to market for new products, and continue to innovate and personalise their offerings. The opening up of data and open APIs has provided a good foundation for achieving this. Indeed, such integration is essential in improving the speed of compliance with the Payments Service Directive 2 (PSD2) and other global open banking standards for banks worldwide.
“Finastra’s State of the Nation research last year found that, globally, 94 per cent of professionals at financial institutions agree that Open Banking is important to their organisation, with 63 per cent reporting that it has enabled them to improve customer experience and 59 per cent stating that it has helped attract new types of customers. However, complying with PSD2 and regional open banking standards can be a time-consuming, expensive and complicated task.
“When we asked what the future looks like, 84 per cent of respondents agreed that open finance is a natural evolution of open banking and, globally, respondents largely agree that open finance is the future of banking.
“The prospect of an open financial landscape could give consumers the ability to share a wealth of financial data with their financial services provider. This includes not just their bank account data, but also data from their mortgages, savings and loans, giving the provider a holistic view of their finances. With this information, a financial institution can offer a better quality and personalised service which truly answers that customer’s needs.
“Of course, the challenge of compliance remains – even as embedded finance takes off. As third-party brands increasingly embed financial services into their own offerings, it’s incumbent on the financial services provider to ensure compliance with all regulatory requirements.
“A collaborative, open platform-based approach is essential in improving data sharing between all parties, and the application of AI, BI and advanced analytics can help streamline the regulatory compliance process and ensure adherence to governance, privacy and security policies, while delivering a great customer experience.”
