There have been great successes for Open Banking in 2020 despite the pandemic, and 2021 has a lot to offer in the form of Open Finance. At The FinTechTalents Virtual Open Finance 2020 event, we heard from many businesses across the financial sector, all sharing their experiences, lessons learnt from Open Banking and what they expect will come from the development of Open Finance. There were numerous recurring themes throughout the event regarding what needs to happen for Open Finance to become more mainstream. The mindset change needed to increase customer centric innovation, the importance of increasing awareness and trust of Open Finance, how standards and interoperability are key to success alongside the quality of the APIs.
Developing a customer centric mindset for innovation
Open Finance provides a well needed shake up to the financial services industry, most importantly, it promotes a new mindset that supports customer centric innovation. This mindset change needs to happen to fully support the functionality that will ultimately benefit the end user. Industry leaders at this year's event passionately supported the idea that industry change is needed, to support a customer centric mindset that will solve inefficiencies in the market. Using Open Finance as a catalyst to create groundbreaking products and services that will support the end user and provide the best experience possible. It is an opportunity to be the change, as opposed to fighting the change which could lead to a market where the traditional bank is no longer as important as it once was.
Increasing awareness and trust of Open Finance
Industry leaders supported the idea that Open Banking and Open Finance are terms that consumers are not yet familiar with. Users often ask 'What is open finance?' and lack experience and therefore confidence, with products and services which require them to engage with Open Banking journeys. This lack of awareness, experience and confidence means that there is a low level of trust. Speakers were in agreement that the goal for companies in the financial industry should be to tackle this as best we can, as a collective. Working together to promote the new products and services available to consumers and aiding them in the adoption of new user experiences.
Fortunately for the industry, Open Banking payments already provides a way in which to introduce consumers to authentication flows and new user journeys. End users who are presented with the option to pay by bank, as opposed to card, will inevitably benefit from engaging with Open Banking leading to further awareness and trust.
Click here to find out more about the benefits of Open Banking payments.
Standards and interoperability are key to further adoption
Open Finance standards are in the early stages of development, with many industry leaders and governing bodies scoping out the next phase. A key talking point was the importance of these standards needing to ensure interoperability, so that the world can benefit from easier adoption of Open Finance and the innovative products and services that it will power.
Experiences from the growth and development of Open Banking are an example of how varied standards have staggered the development of different markets. The key to further adoption is aligned standards that support interoperability, to make it easier for financial institutions and third parties who wish to take advantage of Open Finance.
The development and quality of APIs
Despite the reinforcement by regulators on API standards, banks were not built to share data, they were built to store it. Open Banking APIs need to support a function that banks are not used to, which has led to slower development and therefore a lower quality of API connectivity for third parties. However, there has been a strong foundation put in place to be built upon and banks should embrace new regulatory challenges to continue the growth seen in 2020.
As Open Finance grows banks will need to see TPPs as potential customers as opposed to threats, working to develop a proposition to support the next wave of innovation. This is important for them to maintain relevancy and also develop new revenue streams based on future products and services built on the data they hold.
You can view the improvements that major banks have made through 2020 in our Open Banking API performance roundup here.
Example use case for Open Finance development
In a world where communication around pensions is usually received by post, innovation is needed to bring further control back into the customers hands. Typically hard to manage, switch and consolidate - pensions are a valuable asset to the population and many are lost because of the accessibility issues. Open Finance changes this. Not just for pensions but for various financial products such as mortgages, investments and perhaps in some cases savings. By including more financial data sharing in the scope of regulation and API standards, consumers will have greater control and visibility over the finances in future. Allowing them to make better and more informed decisions regarding their finances.
Read more about the power of Open Finance here.