Open Finance: A new digital habit for Fintechs

Technology has made giant strides in every possible sector but that doesn’t mean it has sidelined the banking sector or fintech in India. One of the growing challenges for customers in the 21st century is accessing financial data. But the availability of different in-roads like mobile banking and online banking services have made it possible. According to a survey, McKinsey predicts that global economies will see a 1-5% increase in GDP by 2030 with ‘financial data sharing’ becoming a global phenomenon and the country has seen fintech certifications/courses gaining momentum. 

One way of adopting this trend is to digitize financial infrastructure in banks and financial institutions through technological, regulatory, and competitive forces. The integration of technology into finance also creates a customer-authorized data sharing market. As the global economies are recovering from the worst pandemic hit, it has become more important than ever to boost growth, economic efficiency, and productivity. 

Said that, let us explore some fintech solutions profiled in this blog on how both banks/financial institutions and customers benefit by adopting open financial data.

Increased Access 

A key advantage open finance gives to banks and other fintech firms is unlimited access to customers' data and accounts to provide new product offerings tailored to their needs and preferences. Through increased access, finance companies also provide customers with simpler solutions at a faster pace without filling forms and paperwork. Crunch energy and time by learning a little technology and getting adjusted to automation to make smart and informed financial decisions. 

Centralization of Services

Open Banking allows banks and financial institutions to gain sole control of various customer services through single window governance to have deep scrutiny of the offerings in terms of loans, financing, loan advisory services, business consultation, and other allied services. Centralization also leads to improved workforce allocation of members in fin services so as to avoid any friction between the financial services and the third-party providers and engage in providing value-added services.

Assess Creditworthiness 

Digital transformation in banks and financial institutions leads to creating dashboards that bring together savings, investments, and cash flows to extract better insights relating to behavioral patterns to accurately evaluate credit risks of customers while offering loans through risk-based pricing strategies. 

High User Experience

Open financial data crunch time on burdensome processes of customers filling forms and other routine tasks. Open banking also helps customers with greater visibility of their financial lives to manage wealth and enhance flexible and easy payment options. Open data economy allows banks and financial providers to collect internal and external customer data to build relevant experience to ensure customer data is secure and safe. 

Speed Operational Efficiency

As financial institutions work on the customer-directive finance model, it leads to an increased operational efficiency and data management process, instead of the traditional crowd-lending platforms like banks and other financial institutions. 

Blocks Data Manipulation

Since Open Finance is done through the digital ecosystem, it provides fintech/bank providers complete control over fraud infiltration that may lead to data risk by the third-party providers. Licensed data aggregators broker large financial data using different data capturing standards to create value-add and authenticate transaction services to customers.

Expand Customer Base

With the attraction of new clients through open banking, there is a high tendency for the finserv market to expand allowing diversification of services and products and offering unique customer experiences. Open data economy not only promotes new offerings but proliferates new partnerships and market share of financial firms. 

As reports by McKinsey suggest that over 10-20% of banks and financial institutions will embrace digitization in the post-pandemic era and as customers look for a fast, flexible, customized, multichannel, and seamless experience, professionals and students can think of fintech courses like the more accurate need of the hour!