As banks allow customers to share transaction data via APIs with third parties, it opens the doors to both more competition & new partnerships. Specifically, it will lift smaller, more innovative companies to openly compete & work with bigger banks.
Open banking is widely expected to cause innovation throughout the banking industry.
As banks allow customers to share transaction data via APIs with third parties, it opens the doors to both more competition and new partnerships. Specifically, it will lift smaller, more innovative companies to openly compete and work with bigger, more established banks.
This will create opportunities for all banks and other financial institutions to work as partners on new products that will better respond to marketplace needs as they arise.
Banking customers also will benefit, as they will have many more options for picking providers of financial services, and switching providers will become easier. Open banking also promises to make transactions easier for customers and to consolidate their financial accounts.
However, open banking also will create some new challenges. Banks will need to stay on top of their game, making sure their services are secure from hacking. Banks also will need to commit to staying on the cutting edge, developing products that appeal to customers and that are as good as -- or better than -- the offerings of competitors.
While some bigger banks may view this as a threat, it is more likely that the spur of competition and lure of new partnerships associated with open banking systems will force all banks to relentlessly innovate. Those that take up the new challenges successfully will have an opportunity to increase revenue by attracting more customers, and lowering costs as they become more efficient.
In short, open banking will force all financial providers to innovate and to provide the services customers want and need. Banks also will need to stay on the cutting edge to keep their customers' personal data private and secure. The banks that rise to this challenge will quickly outpace competitors.