New financial paradigms: Open Banking, Open Finance, and Open Data Economy
Open banking: how technology enable the evolution
The driver that enabled the change in the financial ecosystem is due to the ever-popular PSD2 (Payment Services Directive 2). Thanks to it, the new technological paradigms of data sharing and interoperability known as Open Data and Open APIs were developed, which gave the foundation for the birth of the Open Banking paradigm.
Open Banking refers to an open, digital ecosystem that enables the exchange of data and information between banking, financial and non-financial players that are part of it. This exchange, of course, only takes place after authorisation by the customers of the banking ecosystem, who always remain the final recipients of the services.
Data access and technological innovation are radically changing the entire financial industry. The financial sector is looking for new business models, products and services. At the base of this evolution is the user experience. Today, consumers interact with companies through a multitude of channels, physical or digital, and expect an increasingly simple and seamless experience.
A concrete example is Digital Onboarding, which is the digital process of welcoming new customers through a secure, easy and reliable identity identification and certification system.
In the first phase of user onboarding, this process digitizes the user experience with faster entry of their data and then allows them to access their account through automated account and identity verification. This enables faster, more personalized and comprehensive banking and non-banking services.
Open Banking evolution: Open Finance and Open Data Economy
The potential of Open Banking is constantly developing, and we are already talking about Open Finance and the Open Data Economy. These two paradigms take advantage of the innovations brought by Open Banking, and apply them to other aspects of the financial sector.
With Open Finance, we move from the simple financial products sale to the provision of comprehensive and customized services. In this new paradigm, integration with external partners and providers has a key role to enrich the offer with insurance services.
Closely linked to this paradigm is, for example, the Bancassurance phenomenon that allows the sale of insurance products through banking channels. Insurance products are distributed by insurance companies through banks’ channels, which use their Open Banking capabilities to expose customer data and relevant insurance products.
Partnerships between different players are the key to access to digital ecosystems, and in this scenario APIs are the driving force behind digital business, as they enable easy and fast integration with strategic partners.
The Open Data Economy is a further evolution of Open Banking. The services provided to consumers not only concern the financial and insurance fields, but all services and products that end users can use in their everyday life: for example, healthcare, lifestyle, travel, etc.
Banks are not only positioning themselves as providers of banking and insurance services, but are also providing platforms with integrated and customized services, for example, such as those concerning the healthcare sphere. This is possible thanks to the sharing of consumer data and consumption habits and the integration of players from different sectors who build different offers based on the multiple consumer needs.
Thanks to technology, companies can ensure a complete, seamless and positive experience across multiple channels. Furthermore, they can initiate integrations and collaborations with new partners quickly and easily, creating bundles of integrated services in record time to make the most of new business opportunities.
This new economic ecosystem will foster collaborations between companies.
New strategies are emerging for the deployment of banking and financial services that are characterized by a network of partnerships in which banking institutions, intermediaries, fintech companies and trading companies collaborate.
Mia-FinTech specializes in simplifying and accelerating systems integration and data interoperability between business partners and this approach enables different financial Use cases.