Faster and more cost-effective consumer banking experiences are must-haves in today’s financial services industry. To help create these experiences, two major trends are emerging in the U.S.: open banking and open data.
Both trends, recently endorsed by the director of the Consumer Financial Protection Bureau (CFPB), involve the use of open application programming interfaces (APIs). Essentially, open banking describes the use of APIs to allow third party developers to build applications and services for financial institutions. To do so effectively and in a manner that creates optimal, secure and relevant banking experiences, these developers need access to consumer data.
Financial industry APIs are already taking root in other developed markets, such as the UK and Germany, as well as in emerging markets. For emerging markets, these APIs may hold the potential to transform the realm of personal finance. In Latin America, for example, only 51 percent of adults have bank accounts, making them ripe for non-traditional, tech-forward personal finance solutions. A recent survey of Latin Americans in Chile and Mexico indicates an eagerness for technological advancements in the finance industry and a preference toward mobile payment apps. An open banking standard could greatly impact the banking population and provide consumers with access to products and services like lines of credit, loans and savings accounts.
When strategizing for better connectivity with banking consumers, consider how the ‘open bank’ and ‘open data’ concepts may be leveraged within your financial institution and its network of banking innovators. Willingness to adapt to these and other concepts may open up endless possibilities.