One of the biggest topics of discussion at the Money20/20 Europe conference this year was Open Banking. Open Banking is the sharing of banking customer data via open APIs, a concept designed to lower the barrier of innovation in financial services and encourage fintech providers to work together. Within a few short years, Open Banking has been embraced by financial institutions and consumers alike. In the EU, recent PSD2 legislation has actually mandated that EU banks publish their APIs to consumers and third-parties. In countries like the U.S., Open Banking has not yet been codified under law but is growing in popularity thanks to consumer demand as well as rising competition among fintech providers. A decade ago, only a handful of financial institutions opened their APIs up to third-parties; but today thousands are establishing open APIs through one-off data sharing agreements. Experts at Money20/20 Europe agreed that financial institutions need to embrace Open Banking to remain competitive and relevant in the digital economy.
Why is Open Banking so important for financial institutions and, in particular, credit unions? For one, it is often what members are demanding. According to one survey, 61% of banking customers support the concept of sharing their data through Open Banking. Instead of relying on multiple disparate technology and banking providers to deliver products and solutions, members now expect their service providers to work together and provide a seamless experience across a number of applications. Credit unions have always recognized the importance of a customer-centric business strategy and Open Banking is a natural extension of that philosophy in the digital banking era.
In addition to happy customers, Open Banking will also provide a number of other benefits to credit unions. For example, it will open up an innovation pipeline between credit unions and other fintech providers, allowing them to build new solutions together, faster. It may also help to alleviate some of the security and privacy concerns around the unauthorized sharing of member data with third-parties.
In essence, Open Banking promises to create a new financial services ecosystem. We’ve seen glimpses of what that ecosystem may look like in places like China, which offers a fully integrated payments system through services like AliPay and WePay. While we are a long way from seeing something of that scale in the U.S. and Europe, we will almost certainly see a shift in the role of the financial institution in the Open Banking era. Credit unions that charter their digital transformation towards an ecosystem approach via Open Banking will ultimately be best positioned to thrive in this increasing competitive landscape.
CO-OP is working to bring the benefits of Open Banking to credit unions through a single, integrated ecosystem. Contact us today to learn and discuss ways to prepare for future of Open Banking.
And be sure to join us at an upcoming CO-OP Roadshow in a city near you. We’ll be presenting seven strategies to accelerate digital transformation at your credit union along with the latest consumer trends you need to know. See the full schedule: http://co-opthink.org/event-types/regional/