The sharing of data between financial services organizations and third-party service providers through application programming interfaces, or APIs, opens a world of new possibilities for banks and their customers. Banks can go beyond their own walls and tap into a burgeoning ecosystem of innovative fintechs, payment providers and even other banks.
By providing access to previously unavailable or unaffordable cutting-edge financial services, open banking may help level the playing field between smaller banks and the technologically well-equipped large banks. More competition stands to lower costs, boost efficiency and enhance customer service.
In this BAI Executive Report, contributing writer Dawn Wotapka talks to several financial services experts taking the long view of open banking. Before open banking’s promise can be fully realized, however, consumers have to be comfortably on board. “Open banking will be brought to light using the consumer satisfaction route,” says Mark Stewart. “This has to be the path that open banking will take because no one will willingly choose to allow their financial information to be transferred if it doesn’t do them any good.”
Another expert, Eric Marts, tells Dawn that consumers also need to see increasing options on how their banking data is used by third parties. Fortunately, there are already great examples in consumer lending, finance management, taxes, payroll and payments, he says.
Contributing writer Katie Kuehner-Hebert talks to several industry observers who say it’s not just consumers who stand to benefit from the broadening influence of open banking but small businesses as well.
By embedding third-party fintechs into the digital banking environment, business customers can better control their expenses, cash flow, payment rails, permissions, loans, forecasting and other financial activities from their trusted banking environment, according to Julie Morlan of Jack Henry Digital Solutions.
In this month’s Executive Report Q&A, we speak with David Foss, chairman and CEO at Jack Henry and Associates, who shares his thoughts on open banking—where it currently stands in the U.S. and where he thinks it’s heading. In his view, open banking in the U.S. is being driven by customer demand, and alongside the challenges for banks, there are also considerable opportunities.
“Open banking is coming. It’s here already, and it’s going to only become more of a topic in the United States,” he says. “Customers are going to have access to the data within banks, whether they like it or not.”
Also in this month’s Executive Report:
- A work in progress: Bottomline Technologies’s Rita Hubner says open banking has a head start in the U.K., but it will continue to gradually develop for consumer and commercial purposes in the U.S. “Fintechs will continue to have a leading role in banking innovation due to their agility and tech-centric approach and are poised to continue that role as open banking continues to gain traction,” she writes.
- The BaaS revolution levels the playing field: Banks and credit unions, according to NICE Actimize’s Eric Tran-Le, can deliver an elevated online and mobile banking experience by tapping into the robust fintech ecosystem. “Banking-as-a-Service provides small banks with the means to offer streamlined services that meet these expectations,” Tran-Le says. “Through BaaS partnerships, small banks can leverage ready-made solutions and APIs to integrate their systems with various financial products and services.”
- Enhancing the digital experience through APIs: Apiture’s David Biesack believes financial services organizations can deliver an elevated online and mobile banking experience by tapping into the robust fintech ecosystem. Banks and credit unions “can leverage APIs to offer best-of-breed capabilities that are most aligned with their unique user base,” he writes. “Beyond basic capabilities like viewing account balances and making transfers, features like financial health tools can help consumers manage spending, create budgets, learn about savings opportunities and track goals.”
- From screen scraping to open banking: Innovative methods of financial data sharing, says Axway’s Laurent Van Huffel, offer banks greater security, efficiency and compliance. “The road from screen scraping to open banking is full of possibilities,” Van Huffel writes. “If banks take a business view of APIs and make it easier for internal developers, partners and third parties to adopt them, they will thrive in an expanding financial ecosystem and discover new avenues for growth and customer engagement.”
We hope you will find actionable insights on open banking in this BAI Executive Report. As the experts here agree, open banking is an important development that promises to reshape the face of consumer and small-business banking in the near-term future.
Edmund Lawler is a contributing editor for BAI.
We offer actionable insights on other open banking topics that can benefit banking institutions in the BAI Executive Report, “Creating new opportunities through open banking.”
