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"Open Banking" escalates customer value

Updated time: May 12, 2020, 04:33 (UTC+03:00)

Open banking is a modern way that third parties can access to customer’s data by authorization from banking customers. By this approach, financial organisations and banks can work with retail merchants concomitantly to understand more and satisfy customers deeply. However, open banking still accompanies some drawbacks that many customers are considering in terms of security.

What is “open banking”?

The term can be defined in many different ways such as PSD2 in Europe and Open Banking in the UK; but in general, it refers to the ability for banking customers to authorize third parties to access their banking account data to collect account information or/and to initiate payments. Some particular examples for this definition include streamlined mortgage applications, the weekly shopping or standing orders, money management dashboard or financial tools, trigger event notifications, etc.

Some markets, led by the EU and the UK, have already taken the leading position by creating and passing their own open banking regulation. Other markets, such as Australia, Canada, New Zealand, Mexico, Argentina, Nigeria, Hong Kong (SAR), Japan and Taiwan (jurisdiction), for example, are also moving in that direction.

DSBC Financial Europe

Credits to Janis Graubins

Pros and cons

"Open banking" creates new capabilities and designed applications to help customers live easier. By applying the concept of “open banking”, financial institutions and banks are able to improve their customer service and become customer’s insight-savvy. Indeed, consumers prefer to use fast and seamless financial and payment services, planned payment instructions that help them save time, manage account balance, risk management or even updated promotion based on personal data.

"Open banking" sorts and analyzes data in order to gain better insights from customer activities and interactions, and helps financial firms know more about their customers’ patterns of behavior, financial health, investment plans and goals. Open banking will also certainly allow payment firms to find niche areas of expertise and develop unique products and services.

DSBC Financial Europe

Source : DSBC Financial Europe

On the other hand, the approach still confronts some challenges. As personal data is confidential and third parties need to be authorised to access this information, the policy makers and regulators have not fully built the standard guidelines and open-minded laws to facilitate information exchange.

Moreover, the trend shows the imbalance regarding information exchanging between financial institutions and retail merchants. While the flow of customer data transfer from banks or financial companies performs easily , there is a limitation in versus direction. For instance, banks are not able to access retailer’s customer data, and this not only creates an imbalance of information, it also mitigates the desire for innovation in the banking sector.

Build a banking ecosystem

Financial organisations have started to expand their ecosystem in order to better serve customers by quickly and effectively connecting to banking partners and third parties, and data and systems will be the key to company agility.

First step is consumer education. Financial service providers should present more benefits that their customers will gain when it comes to the “open banking” approach. After that, the providers may pay attention to technical and operational capabilities to ensure the whole process works concomitantly. Next phase is focusing on open data and security.

Finally, identify and source partners that can enable compliance and operational readiness as well as create new products, services and experiences.

* Infor source: KPMG report - 2019 trends in review

Conclusion

Whether or not financial organisations will need to deal with the implications of “open banking”? The question should be whether they are ready to make the most of it. At DSBC Financial Europe, our team is well prepared to be a strong catalyst that connects all resources into a dynamic financial ecosystem.

You can learn more information about DSBC services by doing a click to this link

Thank you for regarding the above information. If you have any questions about products and services, please contact us here.

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