With the rise of multiple fintech startups and continued shifting customer preferences for digital banking, financial services businesses have endured many changes over the last few years.

Shifting to automated, data-driven processes is the most effective solution for businesses to manage disruption and harness new opportunities. As customers have increasingly moved to online services, the number of physical branches has declined by over 900 annually for the last decade. If this trend continues, some professionals believe branches could disappear by 2034. There is an opportunity in this transformative landscape. Conventional banks can apply digital solutions to gain customer insights and use real-time analytics to enhance and accelerate available services. Open banking allows financial institutions to efficiently share data with other groups via APIs to improve the customer experience. For example, in countries overseas, your bank can allocate discounts or extend credit because they’ve opened up a dialogue within an ecosystem. This concept enhances the value banks can offer customers and strengthens their position to provide new services to their customers.

Automation is initially costly and time-consuming, but some critical challenges impacting financial reporting and measurement relate to missing documentation and errors due to missing documents. Adopting digital technology reduces errors and dramatically reduces the time to complete financial processes.

Digitally managed risk

Risk management is a top priority for all financial services businesses. Analytics, supported by machine learning, enables business leaders to manage risk based on multiple variables, many of which necessarily aren’t clear. For example, climate change will significantly impact the success of many projects worldwide and the potential of borrowers to repay loans. Finance companies must consider all of these challenges in their financial plans. The ability to forecast and determine the impacts of climate change could become a vital factor in future success.
Security and regulatory challenges are also significant to financial services businesses. Harnessing data analysis and support by ML can improve fraud detection and enable necessary changes to improve overall customer satisfaction. A singular data platform provides one platform for all customer data and regulatory reporting.

The combination of real-time analysis and assessing historical data can determine anomalies that suggest potential data breaches. Data and analytics are essential for both data security and physical security. Deloitte has predicted that retail banks can decrease processing expenses by up to 25% and reduce records management costs by a further 70% by eliminating paper. There is still significant space for digital solutions in financial services.

The finance industry is experiencing a significant transformation spurred on by the rise of open banking. This revolutionary stage has accelerated worldwide, enabling financial innovation, driving competition and empowering customers.

Open Banking Explained

Open banking involves a shift away from traditional banking by enabling customers to control their financial information. It allows people to manage financial data with regulated third-party providers (APIs). These solutions allow sharing of details between various financial institutions and customers, creating a more interconnected and collaborative finance environment.

Open Banking also provides a driving force for financial innovation by encouraging collaboration and increasing competition in the industry. By implementing APIs, developers can access information to build new applications, products and services. This results in the delivery of innovative solutions like budgeting tech, custom financial management services and investment platforms. The open banking system creates opportunities for fintech startups and more established financial businesses to work together and deliver customer-focused solutions that tackle specific financial requirements. 

One of the key advantages of open banking is the potential for a better customer experience. By gaining access to financial information, customers can receive personalised financial services. For example, with an agreement, banks and other providers can utilise financial details to generate customised recommendations, insights and alerts to support individuals with better financial decisions. Open banking also simplifies account processes, allowing people to view services within one platform and providing a holistic overview of their finances.

Open banking widens the range of financial services on offer to customers. The broader selection empowers customers with more options, enabling them to select offerings better suited to their needs. It also increases competition with other financial organisations, accelerating the development of efficient, customer-focused services.

While open banking involves sharing financial information, it is based on strict security measures and data protection regulations. Open banking APIs incorporate encryption processes, two-factor authentication and other measures to protect customer details.

The other benefits – Inclusion and democratisation

 Open banking promotes financial inclusion by eliminating barriers to accessing financial services. It empowers people with limited access to traditional banking solutions. Through open banking APIs, fintech businesses can create innovative solutions to meet specific financial needs and tackle the challenges various communities experience. Furthermore, open banking enables new financial organisations, digital banks and fintech startups, raising competition and levelling the playing field.

Regulators globally are recognising the potential of open banking and introducing frameworks to enable efficient and secure implementation of these services. The EU Revised Payment Services Directive (PSD2) and the UK Open Banking Initiative are two examples of regulatory plans supporting open banking procedures. These frameworks create guidelines for data sharing, customer consent and security standards, offering a secure and controlled environment for open banking to progress. Open banking is being adopted globally, with more countries embracing their regulatory system.

Open banking is transforming the financial industry, encouraging innovation and empowering customers. Through secure data sharing, open banking enables more collaboration, improves the customer experience and encourages healthy competition. It offers a broader range of financial services, increases financial inclusion and democratises overall access to the financial system. As the adoption of open banking continues to grow, regulators and other providers must work together and deliver a secure infrastructure that focuses on privacy and data protection. With significant potential, open banking is transforming the financial market, creating benefits for businesses and customers, and shaping the way for a more connected and customer-driven future.

The Chief Product and Technology Officer at Spendesk recently discussed the benefits of data for the finance industry. In our digital world, finance and fintech companies consistently look for ways to use data to deliver more personalisation and relevant services.

Product-related data provides vital insights into behaviours, choices and customer demands, which can support the financial services industry to deliver customised financial products. However, the application of in-product data does create privacy concerns. To strike a balance between utilising the value of data and protecting privacy, the finance industry must implement a customer-focused approach toward data management. 

The fintech industry is an exciting space and while there has been a broader slowdown in investment, the fintech space still can adapt and pivot easier than banks and traditional financial institutions. The agility aspect is critical in times of economic uncertainty when things may need to change quickly. The rise of digital connectivity is providing businesses access to accurate, real-time data that can be applied in a meaningful manner.

The benefits of data cannot be ignored and utilising it in intelligent ways offers significant opportunities for fintech companies. For example, business spending management enables companies can gather so much information from the data collected on employee expenses. Spend management solutions can support business leaders and their CFOs to create spending limits and provide enhanced visibility when examining and allocating budgets. 

A CFO that can show these types of cost efficiencies in the current economic conditions will be in a favourable position. Solutions that utilise AI enable the finance industry to measure large volumes of data, identify trends and apply this information to deliver bespoke financial products and services that meet the requirements of each customer. A financial institution might use data to determine which savings or investment products are the most popular with various demographics, and use this info to create customised financial products that work specifically for those customers. 

One important element of a customer-centric approach is implementing secure data protection policies and processes. The finance sector is heavily regulated, so should be capable of adhering to data privacy regulations. Any customer data has a potential risk, so companies must recognise liability issues and apply the necessary measures to control them. Aside from liability protection, prioritising privacy builds trust with customers. Recent research from Google and Ipsos suggests that 43% of respondents would move from their preferred brand to a second-choice brand if they offered a better privacy experience. 

Another critical part of applying a customer-centric approach is providing individuals with more control over their data. For example, businesses can provide customers with secure online portals to access and manage their data or provide an option to manage who has access to their information and how it is used. It’s vital to consider all opportunities available to build trust with customers while ensuring that data is handled responsibly and ethically. If your business uses data protection policies and processes, remains transparent on data collection and gives customers more control over their data, the data challenge can become a data opportunity. This opportunity can be enhanced by using innovative technology that equally benefits both businesses and their customers.