# The Future of Finance
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-12-14
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: The Future of Open Banking: How Open Finance Is
Meta Description: Discover how Open Banking is transforming financial services, improving customer experience, and driving digital agility within the industry. Learn more here!
URL: https://financedigest.com/the-future-of-financehtml

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_By **Hans Tesselaar,** Executive Director of [BIAN](https://www.bian.org/)_

Open Banking has been a significant phenomenon within the global financial services sector for the past few years, with our research showing that 72% of financial institutions are benefiting from the initiative. With an additional 22% of organisations investigating the impact it will have on their business.

Open Banking has the power to revolutionise the way we manage our financial wellbeing, improves customer experience and increases competitiveness. Despite its revolutionary status, however, Open Banking still [falls short](https://www.financedigest.com/analysis-china-property-financing-tweaks-fall-short-of-investor-expectations.html "Analysis-China property financing tweaks fall short of investor expectations") when it comes to managing our entire cash pot, with the initiative only being applied to payment accounts.  This is opposed to the likes of savings, mortgages, loans and investments.

This is why the [industry has started to coin the phrase ‘Open Finance](https://www.financedigest.com/how-to-drive-a-data-culture-in-the-finance-industry.html "How to drive a data culture in the finance industry"). This, according to [KPMG](https://home.kpmg/xx/en/home/insights/2020/03/engaging-with-open-finance.html#:~:text='Open%20Finance'%20is%20the%20term,products%2C%20including%20savings%20and%20investments.) is the term used to describe the “extension of Open Banking data-sharing principles to enable third party providers to access customers’ data across a broader range of financial sectors and products”.

If banks want to future-proof their businesses for the customer of tomorrow, they must look to [Open Finance](https://www.financedigest.com/the-future-of-open-finance.html "The Future of Open Finance") as a way of doing this.

**Evolution of** [Open Banking](https://www.financedigest.com/what-does-2022-hold-for-open-banking-some-predictions-from-the-ecosystem.html "What does 2022 hold for open banking? Some predictions from the ecosystem")

The [Open Banking model](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models") has initiated an upgrade to outdated infrastructures and processes within financial services organisations. In order to implement this approach, financial services [businesses need](https://www.financedigest.com/the-four-pillars-of-data-integrity-what-finance-businesses-need-to-know.html "The four pillars of data integrity: what finance businesses need to know") to either replace or upend existing systems for greater digital agility. In this way, Open Banking has been an integral part of [digital](https://www.financedigest.com/can-ai-supercharge-your-banks-digital-transformation-strategy.html "Can AI supercharge your bank’s digital transformation strategy?") transformation within banking by providing digital flexibility.

Traditionally, banking has been considered archaic, and when it [comes to digital](https://www.financedigest.com/constructive-digitization-to-let-the-antibody-testing-market-come-of-age.html "Constructive digitization to let the Antibody Testing Market come of age") advancements, the sector often gets left behind. However, the speed in which digital services has grown within the industry over recent years has been extraordinary, though we cannot ignore [COVID-19’s impact](https://www.financedigest.com/covid-19-impact-could-hit-japanese-automakers-output-in-oct.html "COVID-19 impact could hit Japanese automakers’ output in Oct") here. There had been much speculation over the years around whether Open Banking would be the catalyst for digitisation within financial services, then in came the pandemic which has instead led to the [accelerated](https://www.paymentscardsandmobile.com/832-increase-in-open-banking-payments-during-covid-19-lockdown/) adoption that we see today. With our [research](https://bian.org/news-room/bian-in-the-news/2020-year-changed-us/) finding that over half of financial services professionals believe that COVID-19 has encouraged its organisation to prioritise digital transformation initiatives.

Consumers now have access to major benefits as a result of the accelerated development of Open Banking. The ability to access account information [services means](https://www.financedigest.com/what-does-software-as-a-service-mean-for-healthcare.html "What Does Software As A Service Mean For Healthcare?") that customers can track and utilise information about their accounts or grant access to third parties, for example, mortgage service and loan services, across various accounts from one place.  In 2015, long before the idea was being marketed to consumers, 40% [reported](https://home.barclays/content/dam/home-barclays/documents/citizenship/access-to-financial-and-digital-empowerment/Open-Banking-A-Consumer-Perspective-Faith-Reynolds.pdf) that they would be happy to share their personal data in order to receive personalised financial management services. Convenience is King and [Open Banking supports an environment that streamlines the customer](https://www.financedigest.com/why-poor-customer-communication-is-holding-open-banking-back.html "Why poor customer communication is holding open banking back") finance experience, simplifying the personal finance for many.

The decrease in popularity of traditional banks correlates to the rise in [Open Banking as consumers](https://www.financedigest.com/what-vrps-should-do-to-improve-the-experiences-of-open-banking-consumers.html "What VRPs should do to improve the experiences of Open Banking consumers") change their general approach to banking – from legacy to digital. Research from [Statista](https://www.statista.com/statistics/286273/internet-banking-penetration-in-great-britain/) shows that in 2020, the share of people using internet banking (a segment of Open Banking) is 76%, an increase of 21% over the past five years, an upward trajectory of 3-9% every year.

The [banking industry](https://www.financedigest.com/are-banks-destined-to-merely-become-infrastructure-providers-in-the-banking-industry-of-the-future.html "Are banks destined to merely become infrastructure providers in the banking industry of the future?") faces many obstacles as it struggles to keep up with the changing needs of its customers. Open Banking was perhaps a first step towards addressing some of the issues apparent in the [traditional banking industry but operating financial systems in a digital](https://www.financedigest.com/digital-banking-traditional-banks-vs-fintech-providers.html "Digital banking: Traditional banks vs. fintech providers") environment comes with its own challenges. Despite this, Open [Finance is hot on the heels](https://www.financedigest.com/time-to-act-as-cybercriminals-hot-on-the-heels-of-finance-sector.html "Time to act as cybercriminals hot on the heels of finance sector") of Open Banking, opening the door for high street banks to provide yet another level of growth.

**Making the transition into Open Finance**

Open Finance is like the big brother of Open Banking, leveraging its [services but offering a wider variety of sectors](https://www.financedigest.com/the-state-of-cybersecurity-in-todays-financial-services-sector.html "The state of cybersecurity in today’s financial services sector") and products. It will allow [consumers](https://www.financedigest.com/the-digital-finance-revolution-empowered-consumers-turn-digital-to-protect-financial-security.html "The digital finance revolution: empowered consumers turn digital to protect financial security") to make more comprehensive financial decisions, based on their entire financial portfolio, rather than just their payments accounts. In addition to this, it could [potentially open](https://www.financedigest.com/delivering-on-the-potential-of-open-finance.html "Delivering on the potential of open finance") up automated switching and renewals so that there’ll be less friction if customers want to compare different financial products.

Although the underlying technology is relatively new, the potential [benefits signify the next generation of financial services and the industry](https://www.financedigest.com/the-four-benefits-of-digital-transformation-in-the-finance-industry.html "The Four Benefits of Digital Transformation in the Finance Industry") is certainly interested. Our research found that over half (53%) of professionals believe there is a [demand for Open](https://www.financedigest.com/lego-posts-strong-growth-on-robust-demand-new-store-openings.html "Lego posts strong growth on robust demand, new store openings") Finance in their country, based on the success of open banking.

A good example of some early movers is the merger between ING Bank and Dutch Postbank which, used Open Finance to deliver the four data migrations that were required to carry out the process. Not only did this make operations cheaper and faster, but it is also the catalyst for the increased use of Open [Payments by organisations and consumers](https://www.financedigest.com/unfolding-the-great-payments-disruption-how-consumers-can-navigate-this-new-financial-world-and-how-financial-institutions-can-rise-to-the-challenge.html "Unfolding the Great Payments Disruption – how consumers can navigate this new financial world and how financial institutions can rise to the challenge").

To make the most out of the opportunity presented by Open Finance, banks, [technology providers](https://www.financedigest.com/is-your-technology-provider-holding-you-back.html "Is your technology provider holding you back?"), FinTech players, academics and consultants must collaborate to define a revolutionary banking technology framework that standardises and simplifies the overall banking architecture. Only through greater collaboration, are we are able to future proof the industry, weather any storm that comes our way, but we need to [control the costs](https://www.financedigest.com/back-to-basics-for-cost-control-as-the-usual-levers-lose-value.html "Back to basics for cost control as the usual levers lose value").

**Don’t get left behind**

Overall, [Open Banking has demonstrated numerous business](https://www.financedigest.com/isnt-it-time-open-banking-delivered-for-businesses.html "Isn’t It Time Open Banking Delivered for Businesses?") benefits including increased efficiency, enhanced customer insights, reduced costs, better retention and the opportunity to access new markets. Its benefits and growth can’t be ignored with adoption surpassing the [one million mark](https://www.openbanking.org.uk/about-us/latest-news/open-banking-adoption-surpasses-one-million-customer-mark/) in the UK alone. [Open Finance takes this approach one step](https://www.financedigest.com/open-finance-the-next-step-for-global-digital-transformation.html "Open finance – the next step for global digital transformation") further with the opportunity for greater possibilities. Those who are collaborating and embrace this new personal finance management model, with the right technology in place to [support a seamless service](https://www.financedigest.com/tech-amigos-provides-unrivalled-aws-cloud-service-support-for-autorama-groups-leading-brand-vanarama.html "Tech Amigos provides unrivalled AWS cloud service support for Autorama Group’s leading brand, Vanarama"), will be front in line to realise the benefits. Try not to be the ones who get left behind.


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