If there’s a single trend of financial services in 2019 that is worth following, it’s transitioning to an API in order to embrace open banking. Application programming interfaces open your customers’ data up to third parties, allowing them to easily access and utilize customer data. In this way, moving to an API opens the door for your financial institution to invite third parties in and let them identify ways to bring value both to your customers as well as your (and their) organization.
The argument that “everyone’s doing it” sounds childish, but the reality is that financial institutions are switching to APIs en masse in order to, among other benefits, let FinTech partners gain easy access to their customer data. This access allows them to manipulate data, learn from it, and create unique offerings for customers.
If you haven’t already, you should consider getting your financial institution on board with an API, and letting third party vendors and service providers make use of the existing data you already have about your customers. It would be unrealistic to expect a financial institution to make proper use of all their customer data alone, so by providing access to that data, your organization is opening up a world of possibility.
Variety of Benefits
- Risk assessment. Third party analysis can help you quickly and accurately assess a customer’s complete financial picture in order to better understand their ability to repay a loan, for example. The simplicity and sophistication of doing so through an API is unmatched.
- Cooperation with other financial institutions. The ability to seamlessly switch from one financial institution to another probably doesn’t sound appealing to executives striving to maintain and grow their customer base, but the reality is that seamless transitions are a two-way street, and can help financial organizations function in a more streamlined and efficient fashion.
- Customer-facing features. Perhaps most obviously, financial institutions embracing open banking are able to open up their customers’ data to FinTech organizations who can provide unique tools and analysis. Think about things like budgeting calculators, creative ways to help with saving and rewards for certain shopping behaviors.
- Security. Customer information has to follow certain regulatory practices in the age of open banking in order to be compliant and protect customer information, but when done correctly, open banking has the capacity to enhance security. In particular, the ability to verify customer information and financials across multiple platforms establishes a more concrete paper trail and multiple points of information that are more difficult to manipulate.
- Monitoring. Most open banking scenarios require a sign-off from customers, granting permission to use their data. Once done, financial institutions can better monitor their customers’ data and look for issues like irregular banking activity our unexpected purchases that might issue a security risk. Similarly, open banking can enhance monitoring for more routine and expected issues like overdrafts and payments.