Open banking is set to disrupt traditional financial processes. Banking and other financial institutions need to develop new operating models to remain competitive. Data is the new asset for banks which enable them to learn more about their customers and open new revenue systems.
Traditional banking system operates under a closed model that allows large banks to become the primary source for banking services. Open banking system allows smaller players to access customer data easily with abundant security, creating an alternative system of banking. The open banking system can also be beneficial for customers as it allows them to better determine their alternatives by comparing prices from different providers and choose an institution they deem fit. The new system will force banks to include innovative, more holistic, and customer-centric services to succeed.
In order for open banking to be successful, banks need to shift their attitude toward data sharing. A robust security system can protect customers from forged transactions. Banks can cross-check their partners to ensure that the customers are not subjected to unethical behaviour. Successful implementation of open banking will allow banks to deliver increased security through enhanced capabilities resulting in deeper relationships with their customers.
Banks have started acknowledging the fact that a digital channel is a way to stay competitive in the market. Open banking will allow banks to offer advanced features to meet a consumer’s need and provide a more personalized service. With digital platforms, banks can offer non-financial products. Banks can connect a customer’s financial data with a seller to form a partnership that drives purchases outside of their typical scopes.
An effective digital strategy can help a bank survive the unprecedented change in the market, as many third-party players are offering innovative solutions to lure the customers. Open banking can help a bank to stay ahead of their competition.