Financial Technology or Fintech for short is a blend of financial services and innovative technology. It blends the two together, hence, the name, combining both the words finance and technology within it.
Usually, Fintech is associated with mobile making, accessible consumer and business financial services through digital outlets – computers, smartphones, internal systems, etc. Fintech can be labeled as both an evolutionary step and as a direct competitor to traditional financial services.
Open Banking, on the other hand, is the evolution of traditional banking. Hence, it is no surprise that Open Banking and Fintech go hand in hand, working with each other and rapidly moving forward.
Let’s focus on both areas separately first, and then, let’s analyze how they work together.
Open Banking is a relatively new concept that is made possible thanks to huge strides in innovation in the financial sector, from a technical standpoint, in the last decade and a half. Having the ability to crunch large amounts of data and being able to process requests in milliseconds made a concept like Open Banking a reality.
Open Banking revolves around the idea of accessible data. Users can give companies their agreement and a permit to access some data in order to get better services and better products in exchange. With access to relevant data, service providers can procure services and products that are more tailored to the specific needs of the client. Both parties see the benefit – one gets a client whilst the other gets a better service. It’s a win-win environment only plausible in conditions where data can be exchanged freely and quickly. That’s what Open Banking is all about.
Often enough, Open Banking is also categorized as an ideal-based approach with entrepreneurs and businesses in the field seeking to improve a sector of finance that is often considered outdated, not truly transparent, not customer-oriented, etc. With regulators and legislative organs noticing the benefit of Open Banking for the consumer, there are new directives and legislature in place which regulate and release the potential of this market niche. With sufficient know-how and resources in the market, more and more startups, as well as software solutions, begin to pop up, trying to solve numerous issues and make the world of banking more efficient and more customer-oriented.
On the other hand, Fintech is the label attached to pretty much every bit of technical innovation and technology, related to finance. It’s a very profitable sector of business with some of the world’s strongest companies and of course, 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.
You can consider Open Banking a part of the whole Fintech market. In general, Fintech is focused on utilizing already existing technological capabilities as well as creating new ones for the sake of processing financial transactions quicker, making them more transparent and easier. Open Banking and Fintech are inseparable from one another and advancements in one field allow the other to move forward alongside.
Most of the companies in the fields of both Fintech and Open Banking are relatively young. This is why they’re considered to be startups. The name ‘Startup’ indicates a new company that is focused on scaling and growth right away. Services in the digital medium (e.g. online or accessible via computers) are almost always scalable, at least to a degree, which is why startups are almost always exclusive to the digital side of the entrepreneurship spectrum.
The country with the most Open Banking Fintech startups is the United Kingdom. As of now, it has close to 300 unique firms that operate in the field. From simplifying payments, all the way to enabling developers to create better software, Open Banking Fintech Startups have amongst the highest percentage of successful product launches and show great potential for the future. Market analysts predict that the Open Banking sector should double in size by 2026, eclipsing the total market value of 40 billion $.
If you’re wondering what exact role is played by Open Banking in Fintech, the answer can depend. Since we’re in the age of decentralized technology and decentralized data management, Open Banking can be anything developers and regulators wish it to be. In Nordic countries, banks are paving the way for innovation, creating pan-Nordic payment and financial services union of sorts, bringing the countries of Norway, Sweden, and Denmark, and their businesses, closer together.
In the UK, Open Banking is a very competitive market with private capital funding research and development of services for businesses and private customers. The regulators are encouraging new businesses to sprout up with an attractive tax regime. In addition to having one of the world’s most talented workforces, the United Kingdom also has an abundance of financial companies (not just fintech), making development easier and networking – much more productive than in some other locations.
The European Union is following the rise of Open Banking very closely. Its PSD2 directive offers a clear and simple way for Open Banking companies to be monitored and regulated, making their business much more straightforward. This also benefits the clients because, with more Open Banking technology development, customers get more and more access to better service and financial products to the marketplace.
Investors, developers and regular customers should all be interested in what the future holds for Fintech and Open Banking. According to the current trends, Europe will remain the nerve center for most Open Banking related activities with almost 60% of the total users of Open Banking services being located in this continent by 2024.
More and more Fintech companies are going public. They are some of the most anticipated IPO offerings, attracting both local and international investors. It’s not uncommon to see unicorns in the field of Fintech. As Open Banking is a relatively new niche of the market, you can expect to see more and more firms cracking billion-dollar valuations and being highlighted as great investments with immense upside potential, in the future.
Most companies in the field of Open Banking, however, are primarily focused on technological advancements. They draw the line between tech companies and financial institutions. CEOs and people with decision-making power in the sector claim that Open Banking seeks to become the next generation of financial service applications. They’re already anticipating future growth and focus on how current technology can be best utilized for the benefit of the customers of today and how to make advancements in that technology for a better future.
Stats also indicate that Open Banking in Fintech will significantly grow in the continents of Africa and Oceania, as well as the Middle East. We see a correlation between internet penetration and the success of Open Banking and Fintech companies, hence, there are a lot of markets, left to be explored and conquered.
As an authorized provider of Service for Account Information, Nordigen has fused the tech savvy know-how of Fintech with the prospective concepts of Open Banking. Built for businesses, Nordigen can help you optimize financial operation management and streamline many different tasks, related to everyday private and business customer needs.
Open Banking Fintech is a market for today and the future. The evolution behind Open Banking promises to bring people closer together and make high-quality financial services more available to people and businesses around the globe. Consumer lending, brokerages for loans, mortgage lending, and a plethora of other businesses can implement Nordigen with benefits noticeable straight away after adoption.
With continuous improvements and a competent team behind the helm, Nordigen is enabling more businesses to master Fintech & Open Banking. Instead of struggling with legacy solutions or falling behind your competitors, be the one leading the way and setting the trend. Develop, manage and tailor tools to meet the specific needs of your clientele. Nordigen allows you to do that through user-friendly interface and proficient analytical tools with AI capability.
Real-world case studies can show examples of successful implementation of our products. 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 aid your business journey!
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