Financial information

Progress beyond open banking to open finance


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The financial services industry is already looking beyond open banking to open finance, or what Capgemini called “Open X” in the Capgemini World Retail Banking 2019 report. Client awareness of open banking remains negligible, and some account manager payment service providers (ASPSP) missed several deadlines for changes to dedicated interfaces. As a result, industry players are encouraged to prioritize efficient and structured collaboration, facilitated by API standardization and customer data information sharing. In turn, this will create an integrated market, where a transparent exchange of data and services will occur, improving the customer experience and accelerating product innovation.

This is an excerpt from the Finextra and Amazon Web Services (AWS) impact study on “An open bank powered by the cloud, democratizing finance at scale”. Click here to read.

Driven by a shift in product focus towards customer experience, API standardization will also reduce fraud, improve interoperability, speed time to market, and increase scalability, as noted. According to the Capgemini World Retail Banking 2019 report, open finance creates the possibility of an integrated end-to-end experience for the consumer, even as their data and service needs span multiple organizations. From a consumer perspective, this means getting a more holistic view of their financial information, which most likely leads to better advice, reduced operational efforts, and errors resulting from copying data between service providers.

Regarding product innovation, open finance provides access to consumer data – the authorization granted is given by the customer – which was not previously available. This thus creates enormous opportunities for product innovation for financial institutions at all levels and there are almost endless possibilities that open finance offers for new products.

Finconecta went further on this point. When implementing open banking and open finance, financial institutions can benefit from the ability to quickly find and test digital solutions in an independent sandbox, integrated with multiple solution providers with a single integration, monetize APIs and tap into new revenue streams. Open banking, using APIs, allows financial institutions to be part of a much larger customer base and ecosystem, transforming their business into a digital one, where data-driven information is tailored to the individual customer.

Summarizing these points, Tink pointed out that open finance describes the ability of clients to allow third-party vendors to securely access and display their financial data in the financial application of their choice. This means that open finance is about fostering choice, competition and innovation by democratizing access to customer information and financial services.

Access to financial data already benefits thousands of financial institutions and millions of customers. Instant access to financial data allows banks to create a complete 360-degree picture of their customers’ financial situation. It allows lending institutions to make instant and real-time comparisons between mortgages and identify opportunities for cost savings or value creation. Large insurers can also use financial data to anticipate claims and optimize claims handling, improving productivity, reducing errors and fraud.

For most financial institutions, this means that the biggest opportunity open finance offers is to improve the customer experience and build trust. Open finance has the power to create seamless experiences, where data works on behalf of the customer. This allows the client to complete an onboarding process, mortgage application, year-end report or any other hassle-free activity.

AWS partners and fintech companies have developed open finance solutions that complement cloud-based open API platforms and deliver the solutions financial institutions need. With the cloud, financial institutions can scale APIs on demand, pay only for what they consume, and build modern serverless architectures. Building open, cloud-based financing solutions requires minimal investment and investing in this technology today will help financial institutions stay ahead of their industry peers.

This is an excerpt from the Finextra and Amazon Web Services (AWS) impact study on “An open bank powered by the cloud, democratizing finance at scale”. Click here to read.

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