Financial organizations are waking up to adopt open banking application programming interfaces (API) initiatives to compete in the industry. Open banking APIs integrate open-source software and network protocol to combine financial services and personal data across devices.
API eliminates redundant procedures and ensures speed and ease of use for third-party financial service providers. As per a recent report by The Paypers, “Report 2022: The Enablers of Open Banking, Open Finance, and Open Data”, there is an increase of 17% in the APIs offered per bank. As financial organizations partner with third parties, APIs are advancing in the banking industry. They help banks digitally transform their services by increasing the value chain to offer services from multiple applications and companies and minimizing the need to establish or spend resources. Here are a few other benefits of open banking APIs that boosts financial services.
Improves Service Offerings
APIs play a fundamental role in open banking that helps banks extend and enhance their native services and offerings. Banks can easily connect to multiple APIs in the market to expand their service offerings by opening up their APIs to introduce FinTech solutions efficiently. Embracing the economy procured from the open banking API economy enables banks to enhance and transform the appeal to existing and prospective customers alike.
Traditional banks do not offer relevant debt and real-time finance management services allowing the FinTech startup to cement the gap between the bank and the customer. Open banking APIs securely enhance the value of the analytics and data by establishing native solutions or partnering with other FinTech firms that offer efficient services. These factors improve the service offerings and enhance customer engagement.
Enhances Customer Engagement
Open Banking APIs elevate the appeal and enable the banks to achieve the increasing demands of existing and prospective customers. It also accelerates customer engagement in a secure, agile, and future-proof method. Integration of APIs in open banking is vital due to an increasingly competitive environment for traditional banks and changing customer expectations. This landscape creates challenges for conventional banks prompting them to innovate to retain and attract customers. Open banking APIs allow businesses to encourage customers to engage their financial services in multiple ways, from internal credit score services to tax-filling platforms.
Accelerates Digital Revenue and Encourages Innovations
Open Banking APIs primarily increase digital revenue from new channels. Elevations in digital are crucial for banks in an era of open prevalent open banking initiatives. Open banking APIs are armed with multiple customer data and transaction APIs. It allows banks to be creative in displaying financial product innovations needed in the industry, like the facilitation of payment processes on e-commerce sites and card payment services in various applications.
Provides High Compliance and Comprehensive Data Source
Banks maintain high compliance in governance, data protection, and system security. This encourages their partners to follow the standards. At the same time, the data obtained from the API connectivity is validated and updated, allowing business innovators to utilize it as big data for analyzing customers and their spending trends.
API enhances the way the IT teams in financial organizations function by allowing them to promote decentralized access to data and capabilities with substantial compliance, governance, and security. Hence, financial firms get a chance to adopt the open banking API, enabling them to build an IT architecture that embraces speed and innovation.
Increases Customer Base and Helps in Achieving Product Ecosystem
Numerous digital applications allow banks to provide vital services to the user, like making payments, opening account facilities, and applying for credit/debit cards. These solid facilities lead new customers from the user base of related digital services to become customers of the bank that offers open API. Additionally, banking services can be integrated into multiple consumer and business applications making the connected product ecosystem more diverse. Furthermore, open banking API services offer an easy way to optimize the accounts used for transactions anywhere.
Financial services need to future-proof the technologies to ensure speed in agility. To establish an effective open banking API strategy, businesses must create lucrative APIs that offer a competitive advantage and ensure these are supported via effective security measures. To achieve this, financial organizations need to adopt the integration approach-API-led connectivity. This integration provides methods for connecting and exposing assets in a unified manner by encompassing them as modern, managed, and productized APIs, promoting agility and speed. These features allow financial organizations to tell these APIs to a more extensive network that aids in building vital applications, services, and experiences.
Additionally, by embracing open banking through API-led connectivity, banks can transform themselves into platforms that offer BaaS. To achieve this goal, banks need to analyze their services that can be exposed with APIs.
BaaS transformation allows banks to disclose the current and new functionalities to stay in the market to enhance services and monetize APIs.
This will enable them to fixate on their value chain position to maintain their market share and go beyond the traditional customer-bank relationship.
As per a recent report by Juniper Research, “Open Banking: Opportunities, Competitor Leaderboard & Market Forecasts 2023-2027”, the open banking value size is anticipated to reach $57bn in 2023 and $330bn in 2027 with a growth value of 479%. Open Banking APIs are redefining the financial landscape by helping financial organizations improve service offerings, customer engagement, and revenue from new channels. They efficiently enable methods and parameters to build interactions between participants in the FinTech ecosystem. They incorporate core standards behind information sharing, payment initiation, security, identity verification, and analytics.
At the same time, APIs accelerate operational efficiency by diminishing redundant banking procedures. By establishing an effective open banking API strategy, financial organizations can transform from an infrastructure that offers individual services to a platform that provides robust capabilities.