Why Banks Need to Open Up to the Digital Economy

Businessman touching a dashboard with key performance indicator displayed with hologram on a virtual screen. Digital banking.

Traditional banks are identifying new ways they can effectively compete in today’s marketplace. One approach banks are starting to embrace is open banking, which has allowed them to better meet the needs of customers by securely sharing data to third-party applications or consuming data from third-party sources while providing new innovative services. This allows banks to present easily digestible information to their customers so that they can make better choices around financial planning, products and services as a result.

Banks that are committed to innovation are collaborating with fintechs and tech partners in order to bring open banking to life. By partnering with banks, tech providers can take advantage of financial data and turn it into tangible results and insights. Banks that have an open and agile platform will enable faster implementation of new products and deliver an enhanced experience to customers.

Benefits of Open Banking

Banks looking to implement an open banking business model have the ability to reduce costs, grow their business and provide a better customer experience by using an ecosystem of third-party applications and services. Below are the top benefits that a shift to open banking provides for banks, and ultimately, their customers:

The digital economy is here, and it’s time for banks to overhaul traditional business models in favor of simplified, innovative business processes. One industry leader in digital innovation is ATB Financial, the largest Alberta-based financial institution (AUM: $46.8 billion). They offer online self-service shopping of banking products for new and existing customers. They also implemented a chatbot banking feature on Facebook messenger to further elevate convenience and change the way their consumers interact with them.  This is just one example of how companies use technology to deliver a better customer experience and as a result, increase their customers’ loyalty.

Ingredients for Success

For banks who are moving into the open banking realm, there are a few key steps to consider:

  1. Assess and integrate business processes: Banks must review their business processes and see how they can connect all channels like transactional banking and data analytics in real-time to run in a faster, more agile manner.
  2. Collaboration efforts: Banks need to assess their network collaboration and see where it makes sense to co-innovate with partners and fintechs to achieve growth. This might not happen overnight, but it’s important to start vetting options.
  3. Prioritize employees: One of the most important, but often overlooked, factor is prioritizing your workforce and making sure employees are engaged in the digital transformation process and informed of how to use new tools.

The time spent implementing open banking is worthwhile because it offers functional benefits such as providing customers with real-time credit scores through their existing bank accounts and notifying banks if a customer changes their address. It has been exciting to witness the recent collaboration between fintechs and banks. This continued partnership will lead to even more innovative models and ways of conducting business. With customer demands constantly evolving, banks can stay ahead of the open banking curve.