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The evolution of open banking has democratized how traditional banking operates, and now, the momentum continues across trade, lending, payments, and corporate banking, revitalizing the banking domain with the introduction of Open Finance. This new wave of innovation creates new value and convenience for the customer through the re-bundling and unbundling of financial services.
At ECS Fin, we firmly believe that the future of finance and payments is open. Open application programming interfaces (API) allow financial institutions and the end customer more freedom by offering exclusive data-driven insights, streamlining the user experience, or simplifying payments under one roof.
Open Banking catalysts the innovation of open finance to enable the integration of traditional banks and product-centric applications with FinTech’s through an API and orchestration layer.
A retrospective view of the banking was quite different. The evolution of open banking nurtured the relationship between financial institutions and third-party providers (TPPs) to exchange data and services for delivering enhanced capabilities and experiences to customers.
However, Open Finance goes beyond the scope of services and data available at the bank, covering the entire financial footprint. With the customer’s consent, financial data related to pensions, tax, and insurance could all be accessed by a trusted third party.
The Financial Conduct Authority (FCA) of the United Kingdom acknowledged its vision of Open Finance for consumers and businesses as follows:
Let’s first jot down the difference between both the buzzwords before opening the curtains exhibiting benefits of open finance and open banking.
|Data Ownership and Control
|The financial institution has the control over what information should be shared with the third-party providers
|Customer decide what information to share with the TPP
|Banks’s API (open application programming interfaces) is used
|Other financial organizations such as fintechs may also essay the role of API providers
|There is no need to build contract between customers and API providers
|Customers’ consent is required
|European Parliament issued a PSD2 directive that facilitated safer and more innovative payments
|No legal regulations are sanctioned yet
Open banking has set the standard for how banks and other financial institutions should share data. Open Finance came into being to facilitate client finance control by adding the following values for every player of the game.
Open Finance brings more transparency for the customers letting them handle all the financial data such as mortgages, savings, pensions, insurance, and consumer credit – basically on their entire financial footprint
Open Finance consolidates all the customers' financial services to manage their financial accounts and transactions in one application saving time and effort.
As financial literacy is a giant leap for the longer-term investment goals, implementation of open Finance through APIs leverages more robust authentication mechanisms and access control systems, allowing for enhanced data security.
The concerns regarding the data protection policies shouldn’t be overlooked when implementing open finance systems. Banks and corporates seeking to capitalize on open finance should first ensure that the products and services are complied with the highest security standards to mitigate any future risks.ECS Fin offers a complete solution for open finance and open banking, enabling the financial institutions and customers to enjoy simplicity, secure infrastructure, agility, and speed under the hood.
Innovate technology to expedite your digital transformational journey with ECS Fin robust solutions:
Open finance can radically enhance the payment industry if financial institutions and fintech take the command to educate consumers and embrace its opportunities. Stay tuned with us!