Vast Majority of FinTechs Find Value in Open Banking

Vast Majority of FinTechs Find Value in Open Banking

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The great majority of FinTechs find value in the concept and operation of open banking. FinTech refers to the computer programs,  technology, and applications used to make banking and financial services work.

Open banking is a system that gives the user access to the data of a network of financial institutions through the use of application programming interfaces, usually called APIs. An API is the software that connects communication and information exchange between apps.  Any given API connects two devices, apps, or programs to make the exchange of information between them possible. API also refers to the rules and protocols that govern the exchange of information and data between and among programs and apps.

What Is Open Banking?

The Open Banking Standard establishes rules for how data is created, shared, and accessed.  By depending on these networks, open banking offered by financial institutions allows consumers to share their financial data among their financial institutions securely.  The shared data can include bank account information, transaction history, consumer spending habits, and  current credit reports,all made available via open-source application programming apps.

Because of the easy availability of this shared data, consumers will find it easier to transfer funds among their various accounts.  They will also find it much easier to compare the products and services offered by various financial institutions.  This lets consumers meet their own needs in a way that is cost-effective and tailored to their specific needs.  

Why Do FinTechs Prefer Open Banking?

Steven Avila, Vice President, and Fintech Partnerships Manager at Sunwest Bank, explains it this way, “...Banking as a Service (BaaS) technology and software solutions enable fintech’s and other brands to quickly deploy deposit, loan, and payment products without having to select middleware partners.”

Once consumers begin customizing their financial institution experience, FInTech can use that customization to develop new services, products, and apps that are specifically designed to meet those newly defined needs.  

This innovation is aided by the new gateway provided by financial institutions that are opening their APIs directly to licensed third-party providers; FinTechs.  This innovation and collaboration mean that the future of digital financial services almost undoubtedly lies with the APIs and the FinTechs.  

Among the things that FinTechs can provide through Open Banking are:

  • analysis of account status and suggestions for best uses

  • banking services tailored to the age/lifestyle of clients

  • monetization of low-return services shared network-wide

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