Open banking is a concept and a niche. It revolves around the overall betterment of the financial market through the removal of barriers with regards to data and information held by banks. Open banking seeks to improve the accessibility of financial services and to wholly help evolve banking of today. At the heart of open banking is financial technology or fintech solutions. Hence, open banking is inseparable from software. Let’s focus on open-source banking software and programs for open banking in particular!
By allowing interoperability for banks, open banking focuses on opening up the financial market. Making services and products more open and more accessible wouldn’t be possible without the usage of modern technology. Here is the part where software comes into play. By finding niches and areas to evolve in, open banking software is able to solve problems and eliminate challenges through the digital medium.
Software tools are mostly developed by 3rd parties and IT companies because open banking works mostly, with the help of APIs. They can be very different tools but mostly focus on the analytics and transfer of banking information, initiating payments, verification for income.
The benefit of having such tools increases alongside with the evolution of the global economy. The more digital impact there is, the more impactful software tools for open banking become. In the past decade alone, global banking has become almost entirely digitized with government legislature and directives focused on making it more secure and efficient, open banking software developers capitalize.
Open banking software statement mostly focuses on solving particular problems. Open banking solutions can only work if the environment is suitable, and by environment, we mean regulations. Some analysts compare the regulatory environment to a lubricant, improving the working efficiency and conditions of the engine, that is the open banking market. Better technology can only thrive in a market that is regulated with account for better technology. That is exactly the case for the European Union and the United Kingdom, current market leaders in open banking development.
Open-source software for banking is one of the driving forces for the innovation of financial technology. Software that is open-source is free to download and utilize for programmers, users and even businesses. If a software or a code is made to be open-source it essentially is given as a public good for anyone’s utilization. Banks and financial organizations take open-source solutions and make them into banking services or products. The added advantage of such a solution is that they don’t need to invest a lot of money into the creation of innovative tools. All they have to do is to adapt the cutting-edge code to their needs which is less time consuming and demanding in terms of other resources.
With an access to a huge knowledge base and free code, banks can focus on tailoring a technological advancement to the financial sector. It can also be used as a foundation for upgrades in the near future.
Regardless of the many added benefits of utilizing open-source banking software, there are some risks involved, too. The development can still cost quite a lot of money, and, if an idea is very unique and the adaptation is quite challenging, the costs can still amount to a lot. Open-source technology is usually very rapidly improving, meaning that you have little time in order to implement the most cutting-edge solution for banking.
But the main risk of utilizing open-source online banking software is the security. There are so many unknowns and so many areas that you have to individually scope out in order to be fully compliant and risk-free, that there really has to be a long process of validation before an open-source code could be used.
Open-source software has been utilized for online banking all over the globe. With the United Kingdom and the European Union countries at the forefront of innovation, there are also countries like Australia and places like Hong Kong with significant developments in their own regard.
They are improving the world of banking in many different aspects. For starters, such tools work on managing and analyzing digitalized data for customers of the bank. More and more of the world is getting connected and banking services should follow – becoming more accessible to people, regardless of their location.
There are also increased strides towards further integration and application of smartphones, handheld devices, AI tools, machine learning and many others. These strides are meant to expand the capabilities of software whilst making them even more accessible and beneficial to consumers.
Speaking of consumers, we have to mention that open banking software statement assertion is usually always focused around not only having smart banking but just by changing the approach of services to something called customer-centric. Open banking is aimed at changing the image of traditional banks which are often perceived in quite a negative manner.
Whether internally developed or open-source, software solutions for open banking are always aimed at solving particular problems, as we mentioned. There are some, quite important challenges that the banking sector of today has to face and, eventually, must overcome.
First and foremost – continuously and rapidly changing demographics. People are getting more accustomed to easier travel, different cultures and want the best possible financial service, and they want it fast. This pushes developers to innovate and to create new and versatile products as well as software that would allow modern-day consumers to find suitable financial services.
The second notable challenge is the goal for better customer service. People know banks and financial institutions as to having abysmal customer service. By analyzing trends and having access to more data, banks and financial institutions can not only solve more problems but also generate more accurate insights and solve problems for their customers.
There is also an increasing risk of new competitors, emerging all over the globe. Smaller financial service companies are always looking for ways to lure clients away from traditional banks, through the innovations that modern banks aren’t able to implement. Through open-banking software it becomes easier to stay ahead of the curve, maintaining a technological advantage or just not letting competitors get too far ahead.
There’s also an added measure of security. With encrypted data transfers and storage, financial services can be optimized without creating unnecessary risk for customers. Government officials and regulators work hard to draft and empower such documents as the PSD2 that enforce strict rules on open banking services in order to prevent any avoidable risk with regards to the integrity and security of sensitive personal financial information.
And finally, we can also note the side benefits which aren’t necessarily linked with banking, but rather different kinds of service. For example, if a person wants to get approved for tenancy, they need to provide all sorts of documentation. Open banking simplifies that and helps obtain authorized bank statements and send them directly to the landlord with a few clicks. Such verification is also utilized for loans and mortgages (income verification) but is looked to be implemented in other areas as well.
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