Don’t Wait! Get Started with an Open Banking Strategy Ahead of U.S. Regulation
Open banking is a reality in many countries already, and here in the U.S., the Consumer Financial Protection Bureau (CFPB) is expected to publish a report later this year with proposed rules for implementation in 2024. Although not official just yet, banks and credit unions cannot afford to wait.
What’s the hype around Open Banking?
Two words: trust and insight. Consumers have lost trust and want more access and control over their financial data following large-scale data breaches, including understanding how their information is stored and who has access. Additionally, with the growing adoption of digital banking, banks and credit unions are seeking improved ways to tap into the user behavior data so they can leverage it to learn more about their account holders, and serve them better with more personalized products and services.
What is Open Banking?
Open banking allows both consumers and financial institutions to share and access data within a secure banking network. Using APIs, account holders gain access to third party capabilities for an expanded banking ecosystem of capabilities, and a centralized view into their multiple banking accounts and services to better manage their finances. For example, if you budget and save with one institution, pay bills from another, and leverage a third party fintech to access your credit score, the traditional user experience may be siloed. In a world of open banking, views become centralized and user experiences become more streamlined.
Banks and credit unions must recognize the advantages of open banking from both an institutional and user perspective, understanding that these capabilities are essential to long-term cost control and securing a competitive future in this new virtual-first environment - both across their payments and digital channels.
Implementing open banking enables financial institutions to:
- Eliminate friction in activities – by leveraging APIs, processes like receiving and completing payments through various channels are streamlined and more efficient – reducing strain on resources and reinforcing convenience for consumers and businesses.
- Improve user experiences – with improved data transparency, banks and credit unions can gain more insight into user behavior data, transaction information and other data points that enable better and faster business decisions based on a deeper knowledge of their account holders. As a result, new products and services can be released based on market needs, and more personalized offerings, such as educational tools and programs, personal financial management (PFM) tools, or offers for new cards, loans, and more, can be marketed.
- Collaborate and compete – by collaborating with open API solution providers, banks and credit unions can add innovative features and companion capabilities to their own solutions, making their offerings more attractive to current account holders but also attracting new customers and members by meeting their diverse needs.
What’s your Open Banking Strategy?
Consumers are already actively engaging in open banking practices even if they don’t realize it, most notably with payments. Peer to peer (P2P) payment transactions, online shopping, and online bill pay have exploded as primary choices for consumers. By linking their accounts to a fintech tool, users inadvertently increase the demand for open banking! Banks and credit unions can target this growing habit and invest in modernizing their payment infrastructure as a first step in their open banking journey. Modern payments platforms leverage APIs and streamline check and payment processing workflows, enabling a true omni-channel approach that keeps users engaged across all points of presentment with a consistent user experience. Collaborating with third-party providers and implementing open, API-driven solutions now will prepare banks and credit unions for what’s to come.
Consider Unify to modernize your payments infrastructure and enable an open banking approach at your bank or credit union, and NXT for your digital banking channels - both with open banking capabilities and access to enterprise-wide reporting and visual dashboards with permission-based access.
With it’s API-driven, open platform, Unify is the only solution of its kind on the market that powers all image acquisition and processing platforms with the same platform and 1 API.
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