Thanks to the momentum that’s been building behind Open Banking, there are many new opportunities for financial services businesses to create digital services that attract, engage and retain customers.
This is the central message of a new report published by Visa Consulting & Analytics in association with Tink, the Visa solution that’s behind Europe’s leading Open Banking platform.
The report argues that every new or emerging innovation in the word of financial services relies, at least in part, on the exchange of data and services between banks and third-party providers.
So, by definition, Open Banking has become a central focus for forward-thinking financial services businesses – and, beyond Open Banking, open finance and data economies.
“Open Banking represents a huge strategic opportunity for today’s financial services businesses,” says Claudio Di Nella, Head of Visa Consulting & Analytics in Europe.
“It enables them to offer services in a much more relevant and contextual way. It also expands the reach of a bank’s services and channels.
So, the potential to attract engage and retain new customers and generate new revenues is significant.
Through this report, we want to draw attention to the momentum that’s been building, the value that’s already been created, and the potential ahead of us, not just in Europe, but also in markets like Asia and the USA, where the emergence of Open Banking has been purely market driven.”
The report therefore provides a series of case studies, to show how Open Banking is changing the way that people engage with financial services.
In addition to a new generation of AI-enabled personal financial management (PFM) solutions, this includes the emergence of more secure and seamless payment journeys, and much faster and easier affordability assessments and credit checks.
The report also provides an update on the vast number of open banking transactions, and the rate of acceleration.
“In the UK alone, we’ve now surpassed 10 million active users, with 1.4 billion API calls in a single month while, across Western Europe, we’re seeing compound annual growth rates of more than 44%,” says Jan van Vonno, Head of Industry & Wallets at Tink.
Of course, if they are to increase their investment in Open Banking solutions and capabilities, banks need to see a clear commercial incentive.
The report describes how Open Banking opens up many potential revenue streams for banks, acting as an enabler for new sales and service models, new value propositions, and new product manufacturing options.
It also provides several examples of the ways in which Open Banking is now creating significant value for financial institutions across Europe.
For example, through embedded finance and banking-as-a-service solutions, the delivery of financial products no longer needs to be restricted to bank-owned networks and channels, which means the source bank can piggyback on someone else’s distribution channels – thereby benefitting from new commercialisation opportunities and reaching new customers.
A key to success has been the investment in more high-quality APIs, which enable better business automation, scalability, and acceleration.
They have allowed for the creation of innovative and customer friendly financial services.
And they have become fundamental to the delivery of a high-quality customer experience by minimising downtime, avoiding errors, and enabling greater operational efficiency.
While more work across the ecosystem may be necessary to drive further improvements, there are now many tangible examples of the benefits this can bring.
The report also includes the perspectives from banks, including an interview with Rob Levy, Barclay’s Director of Point-of-Sale Lending Products, Open Banking and Digital Platforms, who agrees that the future potential and importance of Open Banking is clear:
“There are some areas where it’s really taking off and creating tangible value for end-users and service providers alike. A good example is accounting software for small businesses, which pulls the data directly from business bank accounts and avoids hours of tedium for end users.
Another one is its role in credit decisioning. It makes things quicker and better for the lender and the end user alike. It also enables new approaches to responsible lending and paves the way for new types of lending products.”
He goes onto say: It’s as though we’ve built the foundations, not for a house, but for an entire city, and we’re just starting to get above ground level. So, this is an incredibly exciting time.”
The report, Commercialising Open Finance: The state of play, the direction of travel, and best practices from around the world, can be downloaded HERE
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