Open Banking FinTech - Nordigen

Why open banking is the future of FinTech


| Article by: Abílio RodriguesProfile Image Abílio Rodrigues 5 min

Open banking can be characterised as an evolved form of traditional banking, providing consumers with a consistent set of new options when it comes to their financial life. If having more control over your money isn’t enough, there is also the added benefit of safer transactions through application programming interfaces (APIs).

Financial Technology – or FinTech for short – represents a blend of financial services and innovative technology, combining two of the most relevant aspects of modern life.

There is no surprise then, that open banking and Fintech go hand in hand, working with each other and rapidly moving forward.

 

How open banking and FinTechs work together

In order to better understand the interlinking between these two ideas, let’s first dive into a summarised analysis of their independent meanings.

Open banking is a relatively new concept, made possible thanks to the huge advancements in innovation in the financial sector at least for the last decade and a half. The ability to crunch large amounts of data and being able to process requests almost in real-time is mostly what made open banking a reality.

What is open banking?

The whole concept of open banking revolves around the idea of accessible data, something that used to be proprietary to legacy financial institutions. In exchange, this access to selected relevant information opens the door to better services and products.

Thanks to this, third-party service providers (TPPs) can now offer better solutions, tailored to the specific needs of every customer. There are large benefits to both parties:

The result is a win-win environment, made possible by conditions where data can be exchanged freely and quickly.

Often enough, open banking is also categorised as an ideal-based approach, always aiming to improve quality of life. This is why entrepreneurs and businesses seek to improve a sector that is considered outdated or not fully transparent.

What is FinTech?

On the other hand, FinTech is basically a label attached to pretty much every bit of technical innovation and technology related to finance.

Today we can say that this is one of the most profitable business sectors, dominated by some of the world’s largest companies and the world’s fastest growing startups. Stripe, Kraken, Robinhood – these are just some of the names that highlight a very diverse and unique sector of the market.

FinTech is usually focused on utilising existing tech capacities, but oftentimes concentrates on the development of new ones, to improve efficiency and customer experience by allowing:

  • Faster processing of financial transactions;
  • Easier and more transparent transactions;

As we can see, open banking and FinTech are inseparable from one another, and advancements in one field allow the other to move forward alongside.

 

Open banking and FinTech startups

Usually, FinTech is associated with accessible consumer and business financial services through digital outlets, like computers, smartphones or internal systems. New ways of interacting with financial assets and the demands of modern markets led to the rise of relatively young companies, commonly known as startups.

The term “startup” indicates a new company that focuses its resources on immediate scaling and growth. Services in the digital space (online or accessible via computers, for example), are almost always scalable, which is why startups are almost exclusive to the digital side of the entrepreneurship spectrum.

The paradigm of the United Kingdom

The United Kingdom (UK) is the country with the most open banking FinTech startups, with close to 300 unique firms that operate in the field.

From simplifying payments to enabling developers to create better software, open banking FinTech startups have some of the highest percentages of successful product launches. The potential for growth is also elevated, with analysts predicting that the open banking sector should double its size by 2026,surpassing the total market value of 40 billion dollars.

In case you are wondering about what exactly is the role of open banking in FinTech, the answer might not be as simple as you probably desire. We are now in the age of decentralised technology and decentralised data management, so open banking can be anything developers and regulators want it to be.

If we look at the UK, open banking is seen as a very competitive market with private capital funding the research and development of services, both for businesses and private customers.

Regulators are also encouraging new businesses to sprout up with an attractive tax regime, in addition to having one of the world’s most talented workforces.

Moreover, the UK also benefits from an abundance of financial companies – not limited to FinTech – that facilitate development and networking, making it a more productive market.

The European Union (EU) is following the rise and evolution of open banking very closely, with thePSD2directive offering a clear and simple way for monitoring and regulatingopen banking companies.

More open banking technology development also benefits customers, giving them more access to better financial services and products, tailored to their specific needs.

Nordigen CEO Rolands Mesters - Nordigen

Nordigen’s free API and PSD2

As an authorised AISP regulated by the Financial and Capital Market Commission of Latvia, and authorised in 31 European countries, Nordigen is the first (and only) AISP to make its API totally free to use.

Access to open banking data in Europe is free, and Nordigen believes that it should be free for everyone. With that in mind, we offer free access to personal and business banking data using only PSD2-compliant connections.

Nordigen’s free API connects to more than 1,000 banks in Europe, helping FinTech companies develop new services and technologies. The raw data obtained from said API might be overwhelming for business use, which is why Nordigen developed a set of premium services, including:

  • Transaction Categorisation
  • Income Insights
  • Loan Insights
  • Risk Insights
  • Simple Score
  • Credit Scores
  • Library with up to 1 million Machine Learning features

Businesses just like yours are already taking advantage of cutting-edge solutions and moving their business forward. Why shouldn’t you? Let’s get in touch and see how Nordigen can improve your business journey!

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