How Will Open Banking APIs Transform the FinTech Industry?

How Will Open Banking APIs Transform the FinTech Industry?

Open APIs are what led to the creation of open banking. Open Banking Implementation Entity reported around 1 billion successful API calls in May 2022; the number was around 410 million back in 2020. 

Financial service providers are finally realizing the benefits of open banking opportunities. Traditional banks need to include tech trends to develop digital capabilities that could help them survive and thrive in the oversaturated and slow banking industry. For instance, companies like PayPal, Wells Fargo, Visa are embracing this new invented concept to stay ahead of the course. 

And with the revised payment services directive PSD2, open banking APIs will gradually become a norm. But that’s not the only reason for its amazing success in recent years. Here’s why:

  • More than 35% confirm that open banking helps improve financial decision-making.
  • More than 30% confirm that it increases payment options.
  • More than 20% confirm that APIs have better borrowing opportunities.

Let’s move on to understanding the use cases that financial service providers can use it for. 

Open banking use cases

Everyone is saying that this is the future of the fintech industry. But how can they actually use this technology? Ideally, it focuses on five main areas. 

  • Accounting
  • Banking 
  • Business finance management
  • SME lending
  • Treasury management

One can expect leveraging the open banking APIs in the following ways.

  •  It could be beneficial in personal finance management. Apps like Mint, Revolut are already allowing customers to manage their bills, track their transactions and budgets.
  • It is already helping users to monitor their daily spendings. For instance, apps like Cleo offer a platform for saving. 
  • Who can forget about digital banking. In fact, Chime is the mobile-only bank. 
  • There will be a boost in crypto and blockchain integrated solutions. 

All in all, you can expect a major transformation in the coming next few years. If you haven’t yet leveraged the benefits of open banking APIs, you must read why you should now!

Advantages of using open banking APIs 

  1. Improve service offerings 

This new ecosystem can change the fundamentals of banking initiatives. In a real life case scenario, EBA confirmed that the adoption and integration of APIs could help you improve the native service offerings. It could also result in a power trip since financial firms can use this data and extend their service offerings. 

Examples include Experian Connect API that allows customers to check their credit score without shifting from their bank application. It is quite easy. Another API called NCOA notifies the bank if the customer changes their address. It won’t be wrong to say that banks can transform their current and future offerings and increase the value proposition for their prospective customers. 

This could be an opportunity for banks to stay competitive in a marketplace where they have direct competition from the rising FinTech firms. You can ascend your current offerings and value the analytics and introduce solutions independently or partner with financial organizations providing innovative solutions. 

  1. Improve customer engagement

Open banking APIs are quite appealing as per the current trends. They enable the banks to meet the demands of the customers and be worthy of their prospective customers. They can serve your customers in a unique way and hence it can help you create an agile and secure way to engage with your customers. It’s like being future-ready. 

Don’t forget that customer engagement is a crucial aspect since the FinTech firms are already disrupting the current financial market. You must innovate if you want to retain or attract customers. If you open your APIs, you can break from your traditional banking mindset. You will be able to integrate new-age technologies and can help you add appeal to your current banking offerings For instance, Experian and TurboTax are using APIs to improve engagement and satisfaction.

 Increase digital revenue 

Since you will improve your native services and increase customer engagement, you can easily improve your revenue from different and new digital channels. Open Banking APIs are a tech way of saying “I want to sell by offering you things you like.” It will help you think differently and increase the number of opportunities, which will eventually increase your revenue and ROI. 

In fact, Europe is already using the benefits of open banking APIs. And with PSD2 regulation, the number of APIs will increase and encourage the customer relationships with your bank. This means you will be ready for the future and changing digital ecosystem. 

For instance, brands like PayPal are using peer-to-peer payment service platforms, who have already processed around $42 billion payments in comparison to JP Morgan’s Quick Pay application. This shows how open banking APIs can disrupt the P2P payment services. Let’s be honest here. Open Banking APIs are quite profitable. You can increase around 20% in revenue if you integrate them into your strategy. Trust us, you will not only survive but thrive in this competitive and saturated space.

  1. Banking as a service using API-led connectivity

By now you must agree that this solution offering is the future of banking. You will build new revenue channels and improve agility, speed, and create APIs that will support your security measures. One of the approaches is API-led connectivity. This is like an asset that improves your overall banking functionality. The customers can easily discover assets on their own without any bank agents and control it through options that secures their gateways. 

In fact, you can monetise your APIs in a way that it will help you offer services like banking as a service. You can easily monetise the APIs. Isn’t that amazing? 

Final Key Takeaway: Open Banking APIs can make your banking offerings future-ready

This article clearly shows what you can miss if you aren’t already looking into open banking APIs. If you want to learn more about them, let’s connect and find out how it can help you improve your current and future offerings. 

Next steps? You already know. If you want to compete with FinTech firms, it’s time that you develop future-worthy offerings. Is that right?

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