The financial services industry is transforming due to technological innovation, regulations, and a more demanding digital user. With the presence of AI, the industry is seeing new horizons. However, one fundamental piece has led the way toward where the financial sector has arrived: Open banking.
Open banking aims to increase financial competition by allowing customers to decide who handles their financial information and when giving them the power to choose. As a consequence, customers have better control of their data, and at the same time, it encourages financial inclusion. Additionally, open banking allows to share or consume business services, data, transactions, and algorithms with business partners to create new value for banking products and services.
Implementing an open banking platform in Europe has resulted in better customer services as the European PSD2 regulation regulates payment services and creates two new license types, payment initiation services and account information service providers. In Latin America and the Caribbean, Open banking has boosted financial inclusion. Industry players like NACHA in the US standardized APIs, while in Mexico and Colombia, there are planned regulations for mandatory open banking. Canada plans to implement open banking in 2023.
To apply open banking successfully, banks must focus on several elements, such as governance models, developers’ sites, virtual response services, environment stages, risk assessments, related processes, API and data types definition, and risk committee presentation. One of the impacts of open banking is that by democratizing access to data, banks can optimize their services, know their target customers, and measure their effectiveness, as they continue to build trust, which is crucial to stand out from competitors.
The banking industry is taking a new shape also thanks to AI, as AI-powered applications have revolutionized Open banking. AI has improved the accuracy and speed of financial transactions, and with AI algorithms, banks can detect and prevent fraudulent activities. Additionally, AI-powered chatbots and virtual assistants have made it easy for customers to interact with their banks and improved customer experience.
AI-powered tools can also analyze customer data to provide personalized recommendations and financial advice. Moreover, it has enabled banks to automate their processes, reducing costs, and be more efficient.
Learn more about the benefits, processes, and pillars of open banking in our white paper, Open Banking and its impact on traditional banking digital transformation, which outlines the implementation guidelines in the European Union to carry out open banking initiatives.
Visit Globant’s Financial Services studio and discover how we are helping banks and financial institutions across the globe reinvent themselves – enhancing customer experience, finding innovative technology and products, boosting business capabilities, transforming business models, and creating new revenue-sharing models.