Open Banking and API

Open Banking API is Banks’ New Innovation Spree to Boost CX

When disruption has become the new normal and digital the mainstream, Open Banking API is banks’ new endeavor to accelerate innovation and deliver superior customer experiences. 
Forced to think beyond skepticism, banks are opening their data doors to third-parties to compete in an era where personalization and customer experience (CX) have ascended to the top of the priority list. Amidst disruption and digitization, data is indeed the best way for banks to reap multiple benefits, yet data vulnerabilities shouldn’t be undermined. It’s important to understand how opening up their APIs (Application Programming Interfaces) to developers and financial businesses — to test and engineer new products and services — will help banks explore new growth prospects with respect to customer loyalty, revenue, and more.

What do reports say about open banking API?

For many, open bank data, popularly known as open banking, still falls under suspicion, for good reason. Some of the key concerns are: 

  • Will customers give consent to share their financial data? 
  • Who will ensure the credibility of the third-parties leveraging customers’ data? 
  • Will open banking API platforms succeed amidst the increasing cases of data breaches and attacks?  

These concerns, among others, are hindering the adoption of open banking API. However, recent research answers these questions and demonstrates that open banking is gaining traction among top bankers worldwide

According to a survey done by Accenture, 65% of bankers believe open baking API is largely about opportunities, not threats and that it will help banking businesses see a 10% increase in organic growth. Countries are framing open banking standards to facilitate the creation of a secure and robust ecosystem and ensure compliance with regulatory standards. For instance, in Europe, the Payment Services Directive (PSD2) has been revised to make open banking API platforms secure. While countries including Canada, Australia, Nigeria, Mexico (The FinTech Law), the United States, Japan, China, India and many more have created regulatory protocols to help the bank data-sharing model thrive and evolve.     
For permission-based, open banking API integration, banks must consider such things as risk management, API management, as well as, complete compliance with the new data protocols, like GDPR (General Data Protection Regulation), which is applicable in the European Union. It is true that opening up their APIs can put a bank's reputation at risk but,  with a robust open banking strategy in place, a bank can revive its brand’s credibility and unlock the innumerable underlying benefits. 

Advantages of Open Banking API

In one of their latest articles, the business wire reports that at least 19% of bankers believe APIs and open banking will significantly affect the banking industry in the current year. The year 2020 is being seen as the year when the use of disruptive technology forces such as AI (Artificial Intelligence), analytics, blockchain, ML (Machine Learning), cloud, and more will expand comprehensively. And API banking, in coordination with these emerging technologies, is sure to help consumers as well as financial services providers. Let’s go through some of the main open banking API benefits.

  • Innovated Products and Services 

In the year 2020 and onwards, open banking API is expected to drive significant transformation, resulting in unprecedented changes to the financial business landscape. The development of new products and services built by third-party developers and small financial businesses on banks’ APIs and their related infrastructures will help banks become customer-centric. By allowing third-parties to leverage their data, banks will enable them to gain customer intelligence on things such as the customers’ demand orders, purchasing behaviors, transaction histories, and other details that will help banks better anticipate their needs and engineer bespoke products and services.  

  • Increased Customer Engagement  

Open banking API is all about creating new services and experiences to boost customer engagement. API banking helps banks to better understand their customers’ goals while keeping their customers ahead of the curve. It enables banks to harness FinTech solutions, helping customers feel tech-savvy and maintaining high levels of customer satisfaction. At a time when new banking models such as phygital banking, private banking, online banking, mobile banking, and more are becoming more readily accepted, open banking is another breakthrough that is expected to help banks increase customer attraction, retention, and loyalty.     

  • Enhanced Revenue and Digital Payment Models  

Opening their APIs to third-parties will enable banks to successfully revamp their revenue models and open the door to API monetization. Every time developers and financial services providers use and test a bank’s API, they create new revenue models for the bank. Open banking API will also augment the usage of peer-to-peer (P2P) payment services platforms with the utmost security and transparency.    

  • Improved Agility and Speed 

With the continuously growing mobile-heavy market, banks are determined to provide more connected banking experiences. Open banking API integration allows banks to pitch new products and services with agility and speed by facilitating their API-led connectivity. Opening APIs allows banks to leverage the benefits of cloud technology to offer banking-as-a-service. Banks can migrate their enterprise-wide data, infrastructure, and other workloads to applications in the cloud, which will help them instantly respond to the continuously changing market demands.     

  • Augmented Customer Experiences  

Personalized customer experiences are what digital-born customers demand and contemporary banks aim to deliver. Open banking API is designed to help at both ends. With open bank data, customers don't have to switch between apps to access different bank accounts. They can have instant access to all their banking services through a single app. By connecting all of their accounts through a network, customers will have a unified view of their savings, checking, mortgage, and other accounts. Open banking API will significantly improve the customers’ end-to-end journey.   

Open Banking APIs puts Innovation and Customer Satisfaction at the Core  

According to a Mulesoft survey done in the EU (European Union), 69% of banking customers said they want their banks to be innovative. Another report published by KPMG informs that 63% of bankers believe they are in dire need of increasing their customer intelligence. Open banking API is the true disruptive force that can help banks ingrain innovation as well as customer satisfaction at the core of their business.
Open banking API platforms work on carefully designed principles that ensure complete security and trust. There are a gatekeeper and a redressal system; giving customers the ability to give or decline their consent for data sharing; only authorized third-parties are allowed to leverage banks’ APIs. In closing, open banking API is proving to be one of the key developments that are helping connected banking gain momentum.