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Are Financial Institutions Ready for Open Banking: Challenges and Opportunities
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[ditty_news_ticker id="21083"] Industry Segment Strategic Services Resources Partners Who We Are Industry Segment BLOG Strategic Services Are Financial Institutions Ready for Open Banking: Challenges and Opportunities Resources Contact Our Experts Careers Partners Who We are December 22, 2023 We’re Hiring Contact Our Experts Share: APIs empower ?nancial institutions to provide interoperable services, encouraging open banking. Are you ready for the open ?nance ecosystem? Ecommerce players like Amazon, Uber, and Airbnb have disrupted customer experiences through intelligent use of customer data, raising the customer expectations bar signi?cantly higher. Open banking is based on a similar model of enabling consented and secure data exchange among third party providers (TPP) and ?nancial institutions. It is rooted in the idea that a customer’s data is only theirs and they should have the freedom to share it with their chosen third-party providers. But along with a goldmine of opportunities, open banking also poses challenges that the ?nancial industry must overcome to fully reap its bene?ts. Open Banking transactions crossed 11 million in July 2023, registering 9.3% growth over the previous month. The open banking market is expected to grow at a CAGR of 20.5% between 2023 and 2032. Source: Open Banking Ltd. Source: Global Market Insights Opportunities Presented by Open Banking Open banking has given rise to a pool of opportunities for FinTechs, banks, and customers. Accelerated Innovation In the ?ght to gain traction and boost customer acquisition, ?nancial institutions strive to o?er premium services to consumers. The competition drives innovation to build improved, customised, and more accessible ?nancial products. Elevated Customer Experiences Since the customer has the power to seek “better” services and products at their preferred price points, customer satisfaction is the focal point of all business activity. Enhanced personalization and broader range of pick-and-choose services will considerably improve customer experience. And with more control and transparency, customers can make informed decisions and e?ectively manage their ?nances. New Revenue Streams Open banking opens up new streams of revenue generation for ?nancial institutions and TPPs. Banks can develop new business models to monetize data assets and o?er new age products by upgrading the banking infrastructure. FinTechs and TPPs gain access to data that they can use to tailor their o?erings to speci?c customer needs. Greater Financial Inclusion Million of unbanked households may get an opportunity to access banking and ?nancial services as the competition among open banking participants makes these services more a?ordable and reachable. Open banking has immense potential to bring the unbanked and underbanked populations into the ?nancial mainstream with tailored o?erings. Thus, open banking can play a pivotal role in improving ?nancial inclusion. Careers Contact Our Experts Privacy - Terms
[ditty_news_ticker id="21083"] Challenges of Adopting Open Banking Industry Segment Strategic Services Resources Partners Who We Are To capture the multitude of opportunities presented by open banking, the below challenges will need to be addressed. Challenge 1: Transition in Mindset Industry Segment Customers have long su?ered due to the multiple pain-points of traditional banking. Open banking shifts the power from banks into the hands of the customer. Legacy banking is at a juncture to either adapt to changing customer preferences or let Strategic Services its relevance be obscured by aggressive competitors appearing at warp speed in the ?nancial ecosystem. FinTechs are among the most signi?cant TPPS to use customer data from banks to capitalize on opportunities presented by open banking. The Resources Contact Our Experts Careers most signi?cant challenge for banks is a paradigm shift to perceiving open banking as an opportunity and not a threat to traditional banking. Technology transition is a close second. It is a step-by-step process to securely allow customers to choose Partners to share their data while ensuring TPPs use it for intended purposes only. Steps to Transition to Open Banking Who We are We’re Hiring Contact Our Experts Challenge 2: Complex Compliance Landscape PSD2 (Payment Services Directive – Revised) signi?cantly accelerated the transition to open banking in Europe. However, regions like the US have been much slower to adapt to this banking evolution. America took its ?rst step in this direction in 2020, when the Consumer Financial Protection Bureau (CFPB) issued an Advanced Notice of Proposed Rulemaking to allow consumers to access their ?nancial data. Three years later, in October 2023, the CPFB has proposed Personal Financial Data Rights (PFDR) to protect consumers from excessive surveillance and allow them to walk away from poor services. It is aimed at fostering competition in the industry while giving more autonomy to consumers to control how their data is used. Consumers can now get rid of “junk fees” to access their own data and can legally share their data with their preferred TPPs. Challenge 3: The Trade-O? Between Interoperability and Security In the current age of globalization, regional siloes of regulations may make compliance complex and create friction in data sharing. Achieving a high degree of interoperability among distinct players, i.e., banking systems, ?nancial institutions, lenders, and TPPs, is a time- and e?ort-intensive task. While consumers have greater control, lack of awareness may introduce new vulnerabilities to the ?nancial ecosystem and threaten customer data privacy. Additionally, maintaining the highest standards for sharing consumer data is paramount. Instilling trust in the Open Banking approach among customers is critical to its overall success. Maximizing Opportunities and Overcoming Challenges Whether it is a mindset shift or technology transition, the ?nancial industry is extremely sensitive to even the slightest downtime. Banks, ?nancial institutions, and TPPs need expertise in integrating open banking APIs to securely share data. Platform Banking and BaaS are two of the most adopted open banking facilities as of 2023. The collaborative endeavor requires establishing security standards, complying with protocols and privacy guidelines, and instilling con?dence among Careers Contact Our Experts users.
[ditty_news_ticker id="21083"] Globally, the value of open banking transactions is expected to grow over 500% to reach $330 billion in 2027, from $57 billion in 2023. Industry Segment Strategic Services Resources Partners Who We Are Industry Segment Source: Statista Strategic Services Opus Technologies’ API services help banks, credit unions, FinTechs, and TPPs enable an API-rich framework to develop customer-centric solutions. Our comprehensive solutions help you identify core areas of improvement, facilitate technology Resources Contact Our Experts Careers adoption, and drive growth. Through 26 years of deep experience in the digital payments domain, Opus has earned the trust of numerous partners worldwide, empowering them to elevate customer experience and o?er unique and customized Partners products and services. Connect with our experts to learn how open banking can provide you an edge in the ?ercely competitive ?nancial landscape Who We are and deepen market penetration. We’re Hiring Contact Our Experts Team Opus We’re giving you a fresh dose of insights, perspectives and the latest trends from the world of payments. Join our mailing list to be the ?rst to know about industry news, Opus updates & upcoming events FULL NAME ORGANIZATION EMAIL ADDRESS SUBMIT Transform your business today Y O U R F U L L N A M E Connect with us to know how you can put our domain expertise and innovative payment solutions to work for you. Please ?ll out the form below and we will be in touch. Y O U R O R G A N I Z AT I O N B U S I N E S S E M A I L H O W C A N W E H E L P Y O U ? USA | UK | CANADA | INDIA L E T ’ S C O N N E C T Industry Segment Strategic Services Contact Our Experts Resources Partners Careers
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