2021 will be known for volatility and uncertainty as financial institutions try to survive through the economic and social effects of COVID-19. The shock impact created by the pandemic has reverberated across banking and financial systems.
Many trends are disrupting the banking decision and financial sector post-pandemic, and one such trend is open banking. This trend has caught the attention of key market players including businesses operating in insurance sectors, consumers, fintech investors, and others across the globe. The market players are using open banking to build robust client relations and offer smooth transaction experiences.
In February 2021, over one million open banking payments were processed in the U.K. It happened for the first time in a single calendar month. The progress looks positive in comparison with 300,000 open banking transactions that took place in the year 2019, and 3.2 million transactions performed in 2020.
While some sectors of the banking and finance sector are taking it slow (blaming it on C-suit and consumer response), many organizations are adopting a developer-first approach.
One such organization is a FinTech start-up named TrueLayer. The start-up allows innovators, engineers, and enterprises to access users’ bank accounts securely and smoothly through their open banking platform. The platform facilitates easy share of financial data, instant payments, and identity verification. The start-up believes in putting developers first as they are the ones installing the open mobile banking solution within its clients’ companies.
Open banking is becoming a key driver of the financial sector and holds enough potential to help individuals to make informed financial choices while they are striving to recover from the financial trouble created due to COVID. The growth of the open banking sector can be viewed from the recent market research report published by Allied Market Research, as per which, the global open banking market is expected to reach $43.12 million by 2026, manifesting a CAGR of 24.4% from 2019 to 2026.
Inclusive Efforts in the form of Hackathons
Since the U.K.’s open banking regulations have come into effect in 2018, major brands are taking steps to transform the face of their financial services. In order to stay ahead of the market players and be inclusive and innovative while offering hassle-free banking experiences, some of the major brands recently unveiled a new activity in the form of The VRP Hackathon.
The hackathon is organized by Ozone, UK Finance, and Open Future World, and are backed by big names such as Accenture, VOLT, Mastercard, and Worldpay.
For the past few years, open banking was mainly related to settling one-time payments, however, since the U.K.’s open banking guidelines, organizations can offer a wider range of real-time payments, including periodic subscription, intelligent transfer of funds between various accounts, bill payments, and embedded single click digital commerce. Do you know if you have a Demat account along with your bank account that can leverage many benefits?
These types of payments are called Variable Recurring Payments (VRPs) and are supposed to dominate the payments sector in the near future. The Hackathon presents a key opportunity for app developers, banking organizations, technology platforms, and payment initiation service providers to display the potential use-cases and propositions of VRPs.
Insurance and Open Banking in the U.S.
Every business that is willing to engage and retain clients are bound to keep up with the new trends and updates. Most of such businesses in today’s world are likely to meet target clients through digital channels first and physical locations later. Insurance companies are the perfect example of such businesses.
One report published in 2020 found that maintaining legacy systems consumes around 70% of insurers’ IT budgets, proving that the sector is ready for innovative and feasible technological solutions. And to make operations feasible, the U.S. insurers are considering open APIs.
Open Banking Efforts made in Canada through Collaborations
Exciting news in the sector of open banking came from Canada a few days ago when Open Banking Initiative Canada (OBIC), joined hands with Open Banking Expo.
OBIC is a non-profit advocacy organization that aims to bring together professionals from multiple sectors of the economy such as finance, regulation, and technology to promote open banking. Open Banking Expo is an international community of Open Banking and Open Finance.
The partnership will work on the digital transformation of the financial services industry and will support the development of the Open Banking and Open Finance ecosystems in Canada.
Partnership in the Asian Region
While developed countries such as the U.K. and the U.S. are making efforts to adopt advanced technological innovations in order to cater the best to the market, the Asian banking sector is also opening up for technological innovations such as open banking culture. A recent update from Singapore says it all.
Datacentre giant Equinix recently announced that the ASEAN Financial Innovation Network (AFIN) will be using its platform to boost financial services innovation in Singapore, along with the global fintech ecosystem. The collaboration states that Equinix will offer AFIN a dedicated on-premise API Exchange (APIX) sandbox on its platform for the benefit of financial institutions. APIX streamlines infrastructure connectivity and integration. It will allow FIs and fintech to install their sandboxes and production services on single tenanted hardware.
Individuals and businesses are striving to recover from the pandemic impact. While individuals are finding smart ways to make investments in order to deal with financial losses and secure the future, open banking is storing the banking and finance sector across the world. Open banking is disrupting the developed economies and the way they operate.