Within the past few years, new technology trends have allowed banking services and financial institutions to use financial data mining for a unique and personalized form of customer outreach and communications. Specifically in the United States, partnerships between traditional banks and fintech companies have developed what is known as “open banking API,” or the use of Application Programming Interfaces.
This unique practice allows regulated third-party companies to access the customer data of compliant financial institutions in order to provide both the banks and their clients with more innovative services and options. Here, we will look at five of the most valuable benefits of open banking and, whether you’re a customer or financial services representative, the new practice is right for you.
1. Integrating New Services and Options
The single most popular among the many open banking benefits is the ease with which new services may be introduced to a financial institution’s clientele. With open banking’s new way of fostering ongoing communications between banks and fintech companies, the spectrum of service offerings available to customers is greatly widened. With the inclusion of third-party providers, customers who may not be completely aware of existing technologies can find innovative solutions and conveniences now open to them. For greater customer experiences and, ultimately, deeper customer relationships, open banking truly benefits all parties involved.
2. Financial Operations For Lower Costs
Since open banking solutions can be made available to financial institutions industry-wide, traditional banks aren’t the only form of entity that can benefit from the lender’s point of view. Major banks and privatized lenders both larger and small can all garner the needed insights in making connections between customers’ financial needs and cost-efficient solutions. Small businesses that work within the savings and loan industry can work to offer many of the same new technologies as larger enterprises, which levels the playing field in client outreach. With a streamlined workflow and overall turnaround time, customers can benefit the greatest from the wealth of new options and lower costs.
3. The Centralization of Financial Services
The operational philosophy behind open banking technology is that it takes the traditional concept of a brick-and-mortar institution (even one that offers online banking and mobile device-based app options) and creates a new system. Here, the bank itself becomes a platform, centralizing both the customer data and transaction history in order to produce new innovative solutions. For the financial services industry, the wide-reaching possibilities of near-limitless customer-centric service is a revelation for handling personal finance. Those financial service providers in the banking industry that have long wanted to offer newer, fresher concepts associated with start-up financial entities can now make those innovations available to their loyal customers. Likewise, a benefit of open banking for those small businesses is that they can now offer the long-standing, time-tested options often associated with established major banks.
4. Real-Time Operations
Over the past decade, online banking and app-based transactions have become increasingly popular among financial customers. With that in mind, by integrating open banking and API innovations into their service offerings, banks and lenders can make all transactions and associated customer needs into priority real-time operations. By opening up the possibility of working alongside third-party innovative services, the entire financial services landscape is widened for faster technology, accurate customer transactions, and troubleshooting for real-time results.
5. Accessibility and Customer Service
The new insights gained through open banking and API-based financial solutions not only streamline the overall workflow. With many customers opting for mobile device-based transactions, as well as online banking now a regular preference, last year’s pandemic-mandated shelter-in-place protocols only gave rise to more remote practices. Open banking innovations are ideal for integrating new, emerging technologies into ongoing customer engagement.