How Open Banking APIs will change the business landscape 

open banking

With the explosion of digital channels and apps, the number of people actively visiting their local bank branches have dwindled.

Whilst there will always be a need for banks on the high street to serve those that want to physically visit, many consumers today want to be able to access banking services from wherever they are. 

Leon Muis, CBO, Yolt Technology Services explains that in the years since its inception in late 2015, Open Banking has already transformed the way millions of consumers manage their personal finances and use their data. Through Application Programming Interfaces (APIs) people can view all of their bank account information in one place, connecting institutions all across the financial services sector, and providing financial freedom for the consumer. 

And this has been hugely successful, with the majority of mainstream banks, nearly all challenger banks, and myriad money management apps all giving consumers more choice and freedom with their finances. 

However, businesses themselves are yet to capitalise on the promise of Open Banking and the real benefits the technology can bring. 

Open Banking gives companies access to Account Information Services (AIS), Payment Initiation Services (PIS), and data enrichment capabilities, all through the power of APIs. Some have the resources to develop this technology themselves, but the majority of businesses don’t, and that’s where Technical Service Providers (TSPs) come in to help. 

Through ready-built API’s, third party providers like Yolt Technology Services democratise Open Banking functionality so that the benefits of open banking are open to all, not just the big industry players. 

AIS, the most widely applicable function enables business to gain clear insight into the financial activities of customers-with their permission. Information such as income, bank balance, expenses and buying habits all help to build a profile of the customer-one that is  available instantly, digitally, securely, and with lower costs than sharing physical copies. In practice, that might mean that a lender assessing a credit application can halve the time each case takes, or a bank helping a customer to open a new current account can do so much more efficiently. In a simple form, a budgeting app can provide useful insights into how consumers can reduce their outgoings such as utility bills. 

PIS takes this one step further, and changes the way you operate, not just what you know about your customers. Offering credit card payments has long been the standard option for online merchants, because it’s an easy and safe way for consumers to complete their purchases. However, the drawbacks are significant: processing a credit card payment generally costs you a significant percentage of the purchase price. Settlement windows also delay the transfer of funds. PIS gives customers the ability to pay vendors directly from their bank accounts, while only having to confirm the payment with their bank. And because the transfer is initiated instantly, settlement windows are avoided. It’s easy, secure, more cost-effective per transaction, and all made possible by PSD2 and Open Banking. 

Finally there’s data enrichment which allows any business in any sector to use the information it gathers through AIS to directly inform business and service decisions. AIS will deliver clear insights into your customer base through the information it collects, building up a picture of behaviours, enabling you to plan services more efficiently, and provide a personalised experience to the end user. For instance, a retailer with access to information on customer spending habits, and the ability to identify trends, can send that customer targeted offers for the products they’re most likely to buy. 

One of the key benefits to open banking is that it is fully scalable so not only will it deliver short term benefits to your business, but it will support your business through all the stages of its growth. 

As the world rebuilds post-pandemic, it’s time for businesses to focus on wider strategy. Do you have access to customer information, but no way to do anything with it? Can you speedily access the data you need, and share that information with others? Do you need to reduce costs and increase revenue at the same time? If the answer to any of these questions is yes, then open banking can make a significant difference not only to the way you operate, but to your prospects for future success too.