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View all search resultsOpen banking: Let’s be open, it’s time for collaboration
Fintech undeniably provides a better customer experience than traditional banks through an array of faster and cheaper products and services.
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he convenience offered by digital financial applications has made the fintech industry increasingly popular and prompted exponential growth. Fintech undeniably provides a better customer experience than traditional banks through an array of faster and cheaper products and services. In response to this, several major banks have adopted a new service concept, known as open banking.
Third parties are invited to collaborate on developing apps by utilizing application programming interfaces (API) provided by the banks. This technology enables banks and fintech applications to interlink in order to securely share consumer data given proper consent.
Issues related to customer data remain highly sensitive in banking. Leaks or misuse of this data may harm customers, damage the bank's reputation and results in the loss of public trust in banking. Thus, this collaborative initiative should be brought to the attention of all stakeholders. The opportunities and challenges that open banking technology brings must be thoroughly assessed from various perspectives.
First, from the consumers perspective. Collaboration between fintech and banks is nothing new nowadays. For example, the bank credit channeling activities through fintech lending platform. Peer-to-peer lending regulations allow banks to become lender-customers or creditors in the platform. In this scheme, banks have the right to determine who can borrow from them and the amount to lend.
Meanwhile, the borrower-customers or debtors have less control to exercise. Debtors cannot limit the access to the information of their funding needs. Nor can they decide on who will become their creditors. Data and information regarding the debtors and their transactions will be kept by both the bank and the fintech firm.
Open banking operates differently. Customers must provide prior consent for fintech firms to gain access to their data stored in the bank. Once access is granted, fintech will process the data for the benefit of the customers, so that the customers are able to enjoy products or services that better suit their needs.
For example, if data analysis shows that the customer has a low credit risk level, then the customer can choose loan products with lower interest rates. The customer is given full discretion and transparency over their choices.
