7 ways open banking can benefit your financial institution
As technology evolves, community financial institutions are seeking innovative ways to stay competitive and provide value to their customers.
Open banking has gained traction as a potential solution in recent years, owing to its benefits of enhancing customer experience, improving customer satisfaction ratings and fostering innovation. With its potential to transform financial services, community financial institutions should now be looking at how they can embrace this technology and the wealth of opportunities that come with it.
What is open banking?
Open banking is a concept that promotes the secure sharing of customer data between different financial institutions and third-party providers through standardized application programing interfaces (APIs). In sharing that data, it facilitates collaboration, innovation and the development of new financial products and services.
Financial institutions can leverage the use of this technology to help provide their customers with a better experience and position themselves as trusted financial partners.
The benefits of open banking
Open banking empowers financial institutions to unlock new opportunities for growth while delivering the customer-focused experiences that have long been their hallmark.
For your financial institution, open banking can make it easier to:
1. Empower customers
With the use of APIs, financial institutions can integrate with various financial service providers and allow customers to view all their accounts in one centralized location. From a customer’s perspective, having a comprehensive view of account information will empower them to be more efficient with their financial management.
2. Create a personalized customer experience
Open banking provides you with greater and more secure access to customer data, giving you valuable insights into your customers' financial behaviors, needs and preferences.
Those insights can then enhance marketing efforts, allowing customers to receive personalized financial services and offerings, such as tailored product offerings and recommendations and targeted financial advice.
3. Streamline processes
Transactions such as payments and funds transfers can be simplified with open banking. Customers can then enjoy faster, more convenient payment options, such as peer-to-peer transfers, digital wallets, QR codes and real-time payments — ultimately enhancing their overall banking experience.
4. Build relationships
Open banking makes it easier for you to foster relationships and form strategic partnerships with fintech startups, technology providers and other financial institutions, creating a more collaborative financial ecosystem. With those relationships, you can leverage specialized services and innovations to enhance product offerings and deliver a wider range of financial solutions to customers.
5. Increase innovation
Building relationships with third-party providers also gives you easier access to the wealth of innovative products and services they develop. Your financial institution can connect to new technologies such as budgeting apps, robo-advisors and digital lending platforms, enriching your customer offerings without having to build these capabilities from scratch.
6. Improve security
Using APIs for open banking can help enhance security and fraud prevention.
APIs follow rigorous security standards and protocols, ensuring secure data transmission and protection. Encryption, authentication and authorization are also standard components that support APIs.
These security practices, coupled with comprehensive authentication and consent mechanisms, minimize the risk of fraud and encourage customer trust in sharing their data.
7. Streamline customer onboarding
Many financial institutions still rely on a tedious, form-heavy onboarding process that results in a poor customer experience. Open banking simplifies the onboarding process for new customers by eliminating the need for manual data entry.
With consent, customer data can be securely retrieved from other financial institutions, reducing the hassle and improving the speed of account setup. This helps you simplify the customer onboarding process and the management of customer data.
How Wipfli can help
Whether you’re just getting started with data and analytics or ready to expand with open banking, Wipfli’s consultants can guide you in understanding what technology you need and how it fits into your digital strategy. Contact us today to learn more about how we can help your financial institution adopt innovative, new solutions.
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