Banks are a place with the high reputation, that it is a place where the money can be stored with utmost safety. But it can also become a haven for the data entered. The power to share the customer data with the other firms who offer new services is given by ( API ) application programming interface. A whole new industry can arise if the banks actively pursued this business model which will create a strong relationship between the company and customers while adding value to the both. The initial steps in banks modernization process on handling the consumer data was passing the GDPR and Payment Services Directive (PSD2). It was fintech’s rising competition and government’s regulations which made even the incumbent institutions to open up and share their data. If not treated as a regulatory challenge, it is definitely a way to grasp the unique opportunities for the banks to reposition themselves as the most trusted resource for their customers.
The bankers are rarely put in high regards by the public but the banking institutions have maintained high level of trust. The willingness to handing over their private data is higher than to any other private entities. The banks have unique ways of foreseeing the consumers preferences, their spending habits, income streams and risk appetites which no other institution can tap into. An appetite to expand offerings can be seen in the institutions. In a survey made , 68 per cent of the respondents were okay with the banks sharing their non-banking digital services to the other firms. Services like managing pay roll, tax support or invoicing them to assist the customers in day to day activities.
Open banking can optimize and maximize the digital capabilities creating a wider range of services for customers to have. They can also be tailor made depending on each bank and its particular customer preference. For example, banks may offer services like the insurance provision for individuals or business management tools for the business accounts on everyday basis for its users. On the other hand banks also offer the exclusive and specialized services like appraisal and investment management for the individuals with high net worth in order to meet their specific needs. Large tech firms like Apple, Amazon are offering diversified products including hardware, software, entertainment and cloud services too. All this is possible because of the large and vast data they have collected which provides insights into consumer behavior and demand. This business model is adopted by many challenger banks and it has led to the innovative change so far. All credits to the agility afforded by their small size. For example the company named Revoult offers numerous non-banking services to ,like travel insurance , access to airport lounge as a part of its subscription plan. Even though the challenger banks have the first-hand advantages to these services, the bigger banks also have their own advantages – capital and their credibility. The top banks have enough cash to fund the overhaul of the business models while the challengers also have been able to afford to do so in recent years. But the reserves lack in times of crisis such as the recent pandemic.
The most exciting part of API technology is that, it needs to underpin the data sharing industry preexisting already. And the banks inertia is the only obstacle to this evolution. This opportunity is simply too important for the large incumbent banks to ignore. The future lies in taking the leap of faith.