Through APIs, third-party services can gain access to a person’s banking data. Its goal is to give clients back control by allowing them to safely utilize third-party financial services and products that depend on banking data or operations as the primary phase towards open banking.
The monetary incentives given by open banking are considerable, giving banks plenty of reasons to adopt it. Below are six of them:
Digital Agility Enhancement
A fundamental challenge for open banking is its capacity to transmit information safely, efficiently and promptly. As a result, many banks are having to rethink their data structures, with API-based microservices often being used to make data more accessible. As a result, open banking is both a requirement and an advantage of more digital agility. Enhanced digital agility provides its own set of benefits. It is not only more protected and transparent, but it also enables banks to make internal use of their information.
Improved customer satisfaction.
Consumers who use open banking possess options when it comes to the types and range of financial services to choose from. Therefore, this seems to be a disadvantage for banks, because it enables third-party companies to profit from customer data that they formerly needed to gather themselves. Regardless of whether the bank’s services are integrated, having more options boosts the consumer’s banking experience, reducing the likelihood of them transferring providers.
Compliance
Compliance or at least preparation for compliance is the main reason for the implementation of open banking practices by banks. Maintaining profitability is the goal of compliance, not driving more revenue. As a result, compliance will prevent a company from incurring unnecessary fines and fees, thus improving profits.
Possibilities for collaboration
As previously stated, open banking allows third-party organizations to access client data. Banks can build distinct value propositions by cooperating with third-party financial services firms, which leads to innovative marketing methods. Due to this consumers are reluctant to seek banking services somewhere else because they are content with the service they receive. Long-term profitability improves when consumer lifetime value rises.
A broader clientele
Other participating financial institutions may be able to provide banks with access to customer data. Banking services and products can be created based on integration once the system is in place. Previously, banks were only able to offer additional financial services and products to their customers based on banking data; now, they can also serve clients of other banks, potentially yielding much greater revenues.
Premium API Products
The creation of new, revenue-generating API products is one of the most exciting benefits of open banking. Banks can generate additional revenue streams by creating and selling API products. Other banking products can also be up-sold or cross-sold through the premium APIs.
Conclusion
Although open banking was motivated by regulatory requirements, there is minimal doubt that it has a variety of financial advantages. Client satisfaction and better digital mobility are two of the positive factors which lead to higher customer loyalty.
Furthermore, open banking enhances security, increases opportunities for cooperation, and allows banks to provide new goods and services. OpenPayd can aid in offering customers low cost, instant payments by allowing them to link their bank accounts to your app or platform.