As the banking industry continues to develop, open banking is becoming increasingly popular as it allows consumers to enjoy faster, cheaper and more personalised banking solutions. The fintech industry needs to recognise that open banking is a major source of innovation and is set to revolutionise the banking industry.

What is open banking?
Open banking can be defined as the practice of enabling third-party organisations, such as payment service and financial service providers, open access to the data related to the account of a customer. This data includes customer banking information such as transactions, payment history and other financial information. Third-party organisations are able to access the data through the use of application programming interfaces (APIs). This information is used by third-party organisations to develop and design more advanced and personalised applications and services.

What are the benefits of open banking?
Open banking forces incumbents to be more competitive with fintechs and disruptors. Open banking allows for the development of new, advanced tech resulting in lower costs and a more personalised customer experience. Consumers want a bank that can offer a product that makes their life easier and that helps them to manage their finances. Gone are the days where banks simply facilitated transactions. In order to stay relevant, banks need to expand their service offering, and open banking facilitates this.

Open banking is not here to hinder traditional banks. If anything, it’s an opportunity for them to rise up to the challenge and take steps towards a digital, more customer centric future.

Open banking market trends
One of the major factors contributing to the growth of the open banking market is the increase in the number of people using new apps and fintech services. According to a report published by Allied Market Research, the global open banking industry generated $7.29 billion in 2018, and is projected to reach $43.15 billion by 2026, witnessing a CAGR of 24.4% from 2019 to 2026. The open banking market is expected to rise at a considerable rate during this period till 2026.

How can incumbent banks offer open banking?
Incumbents are in constant competition with fintechs. Open banking, however, provides them with the opportunity to develop new tech themselves instead of partnering with fintechs. Open banking has the potential to drastically increase revenue streams for financial institutions.

Over the past few years, there have been a number of disruptors making waves on the forefront. Although these so-called disruptors are making waves on the forefront; the reason for some of their successes because they have been provided with the skills and FinTech Solutios that their core business relies upon.

If your financial institution is ready to rise up to the challenge and take steps towards a digital, more customer-centric future, then they need to carfully select a soutions that support and assist them.