The importance of digitalization for banks and financial institutions cannot be overstated. Even before COVID-19, when customer contacts could take place in branch offices and in-person settings, the sector was wrestling with the necessity to fulfill the digital expectations of a changing market. The events of 2020, as well as our reliance on digital interactions and banking self-service, have only served to highlight the need and necessity for banks to become more digital.
Consumers aren’t the only ones who stand to benefit. The shift towards Open Banking has resulted in the emergence of hundreds of new fintech platforms and solutions that are pushing the boundaries of innovation and economic development in their countries. Together, they are forming a new ecosystem for small, medium, and big enterprises that can gain directly from connecting to financial institutions via APIs, or harness the ecosystem between banks, fintech, and consumers to adapt their commercial services to their clients.
As banks map their path to digitization, open banking is developing as a competency that institutions will need to tackle to remain competitive and keep up with an increasingly digital economy.
As a result, there has been a surge in consumer-facing finance innovation using the mandatory API standard. The use of third-party fintech apps for personal money management exploded during COVID-19 in the UK, where open banking has taken off the fastest, with 20% of all UK people utilising FinTech platforms.
According to the same poll, the use of Fintech platforms among young individuals increased to 50% during the pandemic. In the United States, Visa and Mastercard are working quickly to integrate FinTechs onto their platforms to enable open banking and build a network-agnostic payment technology system.
More broadly, open banking will make it easier for retail and business clients to choose from a broader range of goods and services, as well as consolidate ties to adjacent accounts and programmes. This connectivity has the potential to significantly benefit bank clients by allowing them to more easily share information with financial advisors, accelerate loans, decrease costs, and secure data transfer.
Banks who do not embrace open banking, in our opinion, will not only limit their ability to connect with clients in meaningful ways but will also limit their opportunity to remain at the forefront of innovation. Instead of being caught off guard by UK legislation or losing a competitive position in an emerging market, banks should begin planning their strategy and investing in the infrastructure required to fully exploit open banking.
To discover more on how Macro Global can help you to monitor, manage and mitigate the above challenges, please reach us out on firstname.lastname@example.org (or) +44 0204 574 2433.