The economy is in a tight spot right now. Inflation is high, and interest rates are also heading north. Many economists fear a recession is imminent. Very little is clear, but amid this uncertainty, a wave of such as open banking technology is sweeping through the banking and financial services industry.
This change started several years ago, but the current economic climate is causing an accelerated shift in the marketplace. That’s why financial services companies look at innovation and improved services as dependable strategies in improving services, even in challenging times.
One of the most significant changes occurring right now is a result of a European directive called PSD2. This rule came into force four years ago and has created an open gateway between all financial service companies — open banking. Although open banking initially took off in Europe, it has already gone global. Simply put, open banking technology creates ONE home for all assets, allowing mobility for the consumer and an evident power shift unto them. Open banking has also created an opportunity for innovative companies to create entirely new financial services that tap into the data now available from banks. An example is the ability to create a simple financial snapshot displaying a customer’s assets and liabilities in a single place, with data flowing from multiple banks.
There are practical examples of how open banking helps customers. For instance, if customers apply for a mortgage, there is no longer any need for paperwork. They’d simply give their lender permission to view their other accounts to check their finances.
We are now at a turning point in open payments, with open banking technology, regulation, and economic conditions coming together to drive momentum for open payments in lieu of card payments. Banks must now align their investments with innovation and comply with payments-related policy and regulatory changes.
The objective is to satisfy demanding customers who want to pay any way they want. In the world of open payment networks, banks will need to cooperate and transform how they engage with their customers, with experience becoming the leading tenet for consumer satisfaction and loyalty.
Customers increasingly see banks as service providers, and engagement is critical. As such, banks need to support the lifestyle and aspirations of the customer, not just provide an account and credit card. Banks must also support savings targets and warn the customer if they spend too much. A modern bank is seen as a financial partner, and open banking technology is an essential tool that helps to create an extensive suite of services that use account information as a foundation.
Ultimately, with consumers having greater leverage over banks, more innovation will naturally follow, and the upcoming years will showcase these emerging trends even more.
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