The digitisation of financial services is increasingly challenging the banking status quo, empowering customers to do more within their bank’s financial ecosystem.
With that, open banking is taking a central and pivotal role in protecting consumers through helping democratise data access and payment services by facilitating shared access to customer and transaction information.
Open banking is making the journey a more seamless one for customers, according to Jean Claude Farah, president of Western Union’s EMEA and APAC operations.
“A customer must consent to their data being shared between parties, but then can take advantage of connected services that enhance their banking experience,” he said.
For the open banking framework to succeed, certain considerations need to be met, according to Farah.
“It will require banks to employ a thoughtful balance of encouraging competition, bringing products to market more quickly, and reaching customers in their trusted environment,” he said.
As part of fostering a trusted environment for consumers, implementing the necessary regulations is necessary.
“As open banking is becoming a more popular trend around the world, many countries are bringing regulations that help to ensure that open banking provides the greatest consumer benefit and maintains high levels of customer data protection,” Farah said.
“We see open banking as an advantage for consumers, financial institutions and fintechs as we all evolve to offer better customer experiences,” he said.
In Saudi Arabia, in line with the country’s Vision 2030, the Saudi Central Bank (SAMA) released their open banking policy in 2021, with the aim of promoting innovation, competition, and financial inclusion within the banking system.
Developing open banking partnerships is also key for accelerating the digitisation journey of large financial institutions, who are typically slow to evolve their technology.
“Open banking alleviates this issue by allowing partnerships to help fill the development gap – bringing new solutions to market much more quickly than if the bank were developing it on their own,” said Farah.
“For Western Union, open banking means that we can integrate directly with financial institutions to offer consumer cross-border payment services funded through the consumer’s account and paid out through our global financial network,” he added.
Alongside large financial institutions, open banking is also supporting the efforts of SME financial institutions.
“SME financial institutions can take advantage of the benefits of open banking by offering new products and solutions to their customers, faster,” Farah said.
“By partnering with fintechs and other institutions, they can increase the speed to market for new tools within their digital ecosystem. These tools can be related to loan providers, cross-border payments, payments for goods and services, cross-selling opportunities and more.”
Opening banking is also bringing rise to a new wave of financial inclusion, according to Farah, who shared: “Customers no longer need to maintain multiple accounts across different institutions to take advantage of all available products and services. As more banks adopt open banking and integrate with a variety of service providers, their customers can access more solutions to meet their financial goals.”
Addressing the security concerns linked to open banking, he explained: “Any time personal data moves from one entity to another, all parties must be vigilant to maintain the highest levels of data security to protect consumer privacy. In open banking, those stakes could not be higher. Today, we transfer data between entities using APIs, which are continuously monitored and pressure-tested to ensure that data is moving in a secure way.”
For banks embracing the open banking revolution, maintaining customer trust through data protection is more vital than ever.
“They must be confident in how the data is being transmitted and used by partners. Banks rely on consumer trust, and a data protection failure could be extremely damaging to their reputation. Therefore, a significant amount of time and effort is placed on keeping consumer data safe, and reducing risk by only sharing what is required to perform the transaction,” Farah added.
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