From Open Banking to Open Finance
Bassem Kitta is a digital service account executive with Axway. He works on enabling organizations with the right technology to increase customer satisfaction and revenue. In this article, he discusses moving from Open Banking to Open Finance.
Most FSI organizations are facing several challenges. Three of them are –
- There is a rapid change in customer behavior. Generation Z is constantly looking for a delightful experience. They are happy to adopt the latest app that provides satisfaction and ease of use.
- Challenges due to digitization are increasing, more so because of AI and digital currencies.
- There is a rise in competition from big tech companies. For example, Apple has a Net Promoter Score of 60% to 80%, while that for banks is 6% to 8%.
Considering these points, banks have to rethink how they do their business to stay relevant. To survive and grow, you must invest more in a new and innovative business model.
Let us look at Europe, where it started with Open Banking, then moved on to Open Finance, and now Open Economy. Open Banking gained popularity around 2017. The European Union created the payment service directive, which was the main driver pushing the banking sector to adopt this technology. PSD2 provided the European Union with the framework that allowed third parties safe and secure access to either gather transaction data or initiate payments on customers’ behalf. While PSD2 did not invent open banking, it has catalyzed accelerated adoption in Europe.
Many countries around the world are working toward an open banking framework. Some are regulatory-driven, based on the PSD 2 model, while others are not regulated.
Now, it is the Open Finance initiative. It’s no longer about opening the system to payment but also to different organizations like investment funds, mortgages, insurance, pension, and sustainable energy. Open finance is pushing to securely open the system to new business cases and new revenue sources. It’s about opening securely to get more revenue.
In the Middle East, the adoption of digital payment is huge. 85% have used at least one emerging payment method. 73% confirm using an open banking app to pay their invoices. 79% of the consumer are familiar with BNPL (by now pay later), which is again based on API services.
Currently, we are looking at open banking and open banking initiatives. It is about account data, transaction data, aggregation of accounts, etc. Over time, people will move to open finance, where organizations will securely open their systems to different third-party providers to get more value for their customers. They will then move to an open economy, where the system will be opened to have more use cases and a larger ecosystem.
Axway enables enterprise customers to open everything securely. Axway turns your heritage infrastructure into brilliant customer experiences, extending the value of your previous investments, adding new business capabilities, and putting you on a future-proof platform to drive your growth ambitions.