The world of finance, and banking in particular, has undergone major changes over the past decade due to the increasing adoption of technology that has greatly disrupted the interaction between banks and consumers. Online banking and highly personalized apps are constantly on the rise to build brand loyalty and help banks maintain competitive advantage, increase revenue and improve customer satisfaction.
According to the Global Opportunity Analysis and Industry Forecast report, Global Online Banking Market Size Valued at $11.43 Billion in 2019 It is projected to reach $31.81 billion by 2027. This rapid growth can be sustained in part by his open banking initiative, which allows third-party he FinTechs direct access to consumer data from banks and non-bank financial institutions. At the same time, the introduction of data protection laws and regulations to ensure that financial institutions are responsible for their use of personal data has raised the bar significantly higher for open banking adoption.
This article looks at the current state of open banking, examines the concerns and hesitations surrounding open banking adoption, and considers what steps need to be taken to facilitate the future of open banking.
Given the nature of the sensitive data and information exchanged in open banking, security issues naturally come to the fore. Security is a major concern for both financial institutions and consumers, and the future of open banking cannot be discussed without considering it. In a report published by Curity, Facilitate an open finance future, more than 71% of the 200 financial institutions surveyed say security-related issues are the most important to open banking adoption. In particular, financial institutions were concerned that their organizations did not have up-to-date systems that complied with their requirements for securely sharing sensitive information. Furthermore, regulation and data protection are essential as legislation is put in place to protect the privacy of user data. Examples of these regulations include: European Payment Services Directive (PSD2) and Open Banking Brazil.
In addition to these regulations, some open banking mandates require the adoption of financial-grade security protocols. These standards enable financial institutions to enhance security and meet customer demands for enhanced access to data and financial services. As such, financial institutions must ensure that their financial information is protected and their APIs are strongly protected. Security issues come to the fore again when discussing open banking and consumer adoption. Without consumer adoption, there is no future for open banking.
Financial institutions should consider the data privacy concerns consumers may have and educate them about the benefits of open banking. Consumers need confidence that the solutions and services offered are trustworthy and that their financial information is always strongly protected. One way he facilitates this is by employing strong authentication methods. Securely embed data in tokens, Standards in the OAuth family These are some of the steps financial institutions can take to ensure the highest level of security for customer data.
Watch the FMLS22 session where the panel discusses Challenger Banks, challenges and opportunities ahead.
Executive role
Another important key to the future success of open banking is executive leadership. the current, 10-11% of digitally enabled consumers Presumed to be an active user of at least one open banking service. Adoption of open banking continues to grow, but it is still far from reaching mass adoption. For this to happen, data- and evidence-backed business decisions by executives will be just as important, if not more important than ever. Without financial institution leaders investing in technology and innovation, adoption fails at the first hurdle.
Leaders of large organizations have the opportunity to lead the way and lead by example to smaller organizations by setting up industry groups to oversee open banking practices. Curity’s survey revealed that 48% of UK-based financial institutions surveyed believe they need industry associations to ensure they meet standards. In addition, investment by senior management in the right technology and staff training is paramount in sustaining growth in open banking adoption. According to Curity’s survey, more than 90% of those surveyed agree that executives should invest in:
- Security tools and infrastructure
- Customer experience (smooth and seamless interaction between app and user)
- consumer education
- Industry associations that ensure regulatory compliance
- Recruitment from large companies
The future of open banking
Open banking has already had a major impact on the financial industry and has great potential to continue to be a transformative force. At the same time, this change does not occur naturally. To ensure its continued success and development, it must have the same focus and enthusiasm that drove its early growth, from both financial institutions and consumers.
Finally, open banking stakeholders should continue to invest in improving the customer experience, strengthening API security, and meeting regulatory requirements to protect the privacy of customer data. As a result, these actions instill trust and drive consumer adoption, which is fundamental to long-term open banking success.
Maria Pelagia is a Digital Marketing Specialist at Curity.
The world of finance, and banking in particular, has undergone major changes over the past decade due to the increasing adoption of technology that has greatly disrupted the interaction between banks and consumers. Online banking and highly personalized apps are constantly on the rise to build brand loyalty and help banks maintain competitive advantage, increase revenue and improve customer satisfaction.
According to the Global Opportunity Analysis and Industry Forecast report, Global Online Banking Market Size Valued at $11.43 Billion in 2019 It is projected to reach $31.81 billion by 2027. This rapid growth can be sustained in part by open banking initiatives that allow third-party fintechs direct access to consumer data from banks and non-bank financial institutions. At the same time, the introduction of data protection laws and regulations to ensure that financial institutions are responsible for their use of personal data has raised the bar significantly higher for open banking adoption.
This article looks at the current state of open banking, examines the concerns and hesitations surrounding open banking adoption, and considers what steps need to be taken to facilitate the future of open banking.
Given the nature of the sensitive data and information exchanged in open banking, security issues naturally come to the fore. Security is a major concern for both financial institutions and consumers, and the future of open banking cannot be discussed without considering it. In a report published by Curity, Facilitate an open finance future, more than 71% of the 200 financial institutions surveyed say security-related issues are the most important to open banking adoption. In particular, financial institutions were concerned that their organizations did not have up-to-date systems that complied with their requirements for securely sharing sensitive information. Furthermore, regulation and data protection are essential as legislation is put in place to protect the privacy of user data. Examples of these regulations include: European Payment Services Directive (PSD2) and Open Banking Brazil.
In addition to these regulations, some open banking mandates require the adoption of financial-grade security protocols. These standards enable financial institutions to meet customer demand for enhanced security and enhanced access to data and financial services. As such, financial institutions must ensure that their financial information is protected and their APIs are strongly protected. Security issues come to the fore again when discussing open banking and consumer adoption. Without consumer adoption, there is no future for open banking.
Financial institutions should consider the data privacy concerns consumers may have and educate them about the benefits of open banking. Consumers need confidence that the solutions and services offered are trustworthy and that their financial information is always strongly protected. One way he facilitates this is by employing strong authentication methods. Securely embed data in tokens, Standards in the OAuth family These are some of the steps financial institutions can take to ensure the highest level of security for customer data.
Watch the FMLS22 session where the panel discusses Challenger Banks, challenges and opportunities ahead.
Executive role
Another important key to the future success of open banking is executive leadership. the current, 10-11% of digitally enabled consumers Presumed to be an active user of at least one open banking service. Adoption of open banking continues to grow, but it is still far from reaching mass adoption. For this to happen, data- and evidence-backed business decisions by executives will be just as important, if not more important than ever. Without financial institution leaders investing in technology and innovation, adoption fails at the first hurdle.
Leaders of large organizations have the opportunity to lead the way and lead by example to smaller organizations by setting up industry groups to oversee open banking practices. Curity’s survey revealed that 48% of UK-based financial institutions surveyed believe they need industry associations to ensure they meet standards. In addition, investment by senior management in the right technology and staff training is paramount in sustaining growth in open banking adoption. According to Curity’s survey, more than 90% of those surveyed agree that executives should invest in:
- Security tools and infrastructure
- Customer experience (smooth and seamless interaction between app and user)
- consumer education
- Industry associations that ensure regulatory compliance
- Recruitment from large companies
The future of open banking
Open banking has already had a major impact on the financial industry and has great potential to continue to be a transformative force. At the same time, this change does not occur naturally. To ensure its continued success and development, it must have the same focus and enthusiasm that drove its early growth, from both financial institutions and consumers.
Finally, open banking stakeholders should continue to invest in improving the customer experience, strengthening API security, and meeting regulatory requirements to protect the privacy of customer data. As a result, these actions instill trust and drive consumer adoption, which is fundamental to long-term open banking success.
Maria Pelagia is a Digital Marketing Specialist at Curity.