Open banking offers traditional banking and financial institutions, as well as emerging fintech players, the tools needed to create a truly personalized digital experience.
Today's consumers expect digital experiences to be as quick and easy on mobile as they are on laptops and this applies to financial services as well. They want a similar experience because the technologies used in their daily lives are identical. Consumers therefore expect the same degree of intuitiveness and ease of use from their financial service providers. However, offering an intuitive and personalized financial service with a simple and easy user journey, while guaranteeing a secure service, presents a real challenge.
Whether traditional financial service providers are able to meet these expectations is a matter of debate. In recent years, a series of new "challenger" banks (neobanks) have attracted tens of millions of customers in France and Europe. Their rapid success demonstrates the gap between consumer expectations and the services previously offered. The arrival of a growing number of fintech companies suggests that the competition will only get stronger.
Open banking offers traditional establishments and fintech startups the tools they need to meet user requirements, reach new segments and offer new and ever more innovative services.
The dynamics of open banking in France
Open banking is a global phenomenon, but the motivations differ from market to market. In some markets, regulation is driving open banking, while in others, providers themselves are leading the way. They then form mutually beneficial alliances that combine the strengths of existing institutions with the agility and appetite for innovation of startups.
France is a combination of these two dynamics. As a member of the EU, it implemented the Payment Services Directive (PSD2) which paved the way for open banking. Effective in 2018, PSD2 requires banks to make their customers' financial data accessible, if they wish to access it through alternative service providers. This requirement however, as the name suggests, only relates to payments.
The UK has gone further, requiring its nine largest banks to develop an open banking standard for other banking services, which has served as a model for other markets. Thus, the United Kingdom, having granted more than 200 licenses, leads in terms of adoption of open banking, while France, Germany, Spain and Italy follow quickly, but with a more small number of licenses.
Within traditional financial institutions, not everyone is convinced of the advantages of open banking. The president of the French Banking Federation has expressed doubts about its viability and the ability of new market players to protect consumer data. Others, on the other hand, see it as an opportunity for these incumbents to revisit outdated business models and position themselves at the heart of the digital financial services ecosystem – as “super producers” in the value chain.
The first steps towards open finance
Open banking will pave the way for open finance, a world of personalized and bespoke financial services, where information is exchanged between applications and devices to optimize the consumer experience. For businesses, this opens doors to innovation – the possibilities for developing products and services are endless. As for consumers, sharing their data offers the opportunity to access more services, better control their finances and improve their financial profile.
What happens next will depend on the creativity and talent of the fintech sector that is thriving in France. We can already foresee many innovations. For example, one can imagine ultra-personalized insurance plans that more closely reflect individual lifestyles, including offering reduced premiums for athletes. We can also imagine tailor-made investment and wealth management services offering recommendations on how much to save, how much to invest and even where to invest, based on a global approach to the consumer's financial profile, personal situation, goals and short-term objectives.
Transforming Business Banking
Open banking also has the potential to transform corporate financial management. Today, companies and their accountants use a multitude of international banking systems and non-integrated tools, such as spreadsheets, SaaS accounting software, time tracking and note collection systems. of charges. There is a lot of manual data processing and thus too much room for human error and inaccuracy. Through open banking, these disparate systems can be brought together for business users, saving time, providing more accurate information, and ultimately improving productivity and business performance. By using open banking to integrate invoice processing, approvals, secure payments and account reconciliation, businesses can also reduce their exposure to fraud.
Even before it hits the mainstream, it's likely in business-to-business services that we'll see open banking drive economic growth by improving customer retention and acquisition, increasing revenue, facilitating international expansion and offering more personalized products and services.