Through bank-fintech engagement, it helps improve customer experience
Open banking hopes to solve these constraints by implementing an architecture where organisations share data through a programming interface, popularly called APIs. This allows banks and financial institutions to effectively exchange information and serve customers better by scaling operations and enhancing customer experience and engagement in a digital world.
Although the open banking paradigm isn’t entirely new, the accelerated focus on digital has made banks embrace this strategy with the objective of achieving market growth. Open banking has democratised financial services by allowing third parties such as fintechs to access data and build solutions that not only help customers but fosters innovation and collaboration between banks and fintechs.
Open banking can be the vehicle that helps the banking industry build better products that leverage diverse capabilities and expertise available in the industry in a collaborative manner. Banks are looking at more partnerships and other various means to better understand their customers and deliver personalised services. An open banking structure ensures a standardised process to align with third-party companies that help accelerate innovation and product development in a risk-controlled environment.
The pandemic has surely changed how customers look at banking services. The rapidly changing global scenario has created the need for customers to adopt newer ways of ‘contactless’ banking. Evolved technology is now encouraging customers to pursue one-click services.
Open banking helps financial institutions create an ecosystem that puts the customer at the heart of everything. The plethora of services as a result of collaboration between product and technology companies also encourages consumers to be digitally savvy.
In the digital era, customers expect an increased involvement from their banks by creating a personalised and comfortable interface, which goes a long way in enhancing familiarity and trust in the product. The use of APIs help build partnerships that financial organisations can make use of for improved consumer engagement. By augmenting some of the best aspects of banks, financial organisations can look to accelerate growth and enhance the customer experience further. The seamless flow of data between products and organisations also raises the question of data security and privacy. This makes customer consent critical.
Since data is the primary aspect of open banking, strict laws, security, and privacy forms the bedrock of this framework. Cybersecurity remains the most important priority in our times as the world moves towards a cashless economy.
It is important for banks to implement necessary security measures to mitigate potential cybersecurity threats. Banks and financial institutions must identify the risks in existing framework and should rectify them before moving forward.
Banks that bestow their customers with the autonomy to manage their financial transactions will emerge as the preferred choice. By providing users deeper insights and increased control over their finances, open banking will pave the way for smarter banking in the future.
The writer is Managing Director, Mashreq Global Services