Open Banking is a global FinTech trend that according to NETInfo is revolutionizing the financial services landscape across the world by enabling banks acquire the skills and tools required to build their own ecosystem through the Open Banking infrastructure.
The company believes that African banks are well-positioned to embrace the opportunities created by Open Banking through transforming their offerings with innovative, agile and efficient solutions that will strengthen customer relationships and increase revenue for the banks.
The platform eliminates the restriction that limits access to customer financial data, with the bank with which they have an account. The account holder will have the ownership of the data and allow them to share with other third parties at their discretion.
Through the use of open Application Program Interfaces (API’s), facilitates business-to-business collaboration and the creation of new eco-systems and business models, for the benefit of financial institutions and their customers alike.
According to NETInfo, examples of new business models can include provision of end to end customer journeys including buying a car – offering a loan, selling insurance etc. Open banking principles also provide an alternative payment instrument, to cash and cards, and can facilitate instant settlement for a purchase. Bank customers will be able to utilize account aggregation and handle their total net wealth from one application, irrespective of where these accounts are held.
Africa as a region where a large population remains un-banked or under-banked, with its’ affordability and accessibility, has the potential to facilitate financial inclusion for millions, the company says. Open Banking will help boost the region’s economy by removing barriers to innovation and facilitating access to essential financial products and services. When Banks, FinTech’s, Telcos and other 3rd parties in African embrace Open Banking they will further strengthen and broaden African financial markets.
Africa as a continent has always been a world leader when it comes to utilizing technology to enable its’ people to carry out transactions quickly, securely and cost-effectively – think M-PESA.
According to NetInfo, by embracing Open Banking, African banks will ensure improved customer experience and greater transparency in banking for the region. A third of the total parties will be pre-authorised to use customer data, negating the need to build new data stores of their own, they can quickly adapt to changing trends and offer new and unique services to customers.
The company also says that open Banking in Africa will play a pivotal role in offering financial services to large sectors of the population who have never had access to financial services before. It will drive transformation in digital financial services by permitting consumers to own and share their data and enabling banks and FinTech companies to utilize this data to offer enhanced products and services to the market.
Another positive aspect from an African perspective is that the region can look at the experiences from other regions and ensure that the Open Banking model they implement is the best fit for them.
NETInfo provides that by embracing Open Banking principles, African financial institutions will be able to reduce the cost of a transaction by enabling payments directly between bank accounts. This will also mean that payments and transfers will have the ability to be settled instantaneously. Through embracing open banking principles banks will quickly remove their dependency on 3rd parties such as credit card companies and mobile money service providers and reduce their costs drastically.