# The Future of Financial Services: Strategies to Capitalize on Open Banking Opportunities
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-02-08
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Capitalising on Open Banking: Strategies for Success
Meta Description: Discover how financial firms can seize opportunities in the Open Banking era while managing risks and costs effectively. Learn more here.
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/the-future-of-financial-services-strategies-to-capitalize-on-open-banking-opportunitieshtml

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_By **Ame Stuart,**_ Vice President, Digital Markets, Capgemini Financial Services

Open banking is an open secret. Financial services providers worldwide recognize the tremendous opportunities open banking creates to digitally transform financial institutions, drive innovation, create a partner-services ecosystem, and unleash new business models to power growth and customer loyalty. What’s less clear is how banks can take full advantage of those [opportunities without exposing themselves to undue risk](https://www.financedigest.com/hybrid-working-a-risk-or-opportunity-for-the-financial-services-industry-2.html "Hybrid working: a risk or opportunity for the financial services industry?") and costs.

**How we got here**

Before examining strategies to capitalize on the [Open Banking era](https://www.financedigest.com/why-open-banking-heralds-a-new-era-of-ecommerce-merchant-and-bank-collaboration.html "Why Open Banking Heralds a New Era of eCommerce Merchant and Bank Collaboration"), let’s take a closer look at how we got here. Across the globe, regulatory and consumer-led forces have pried open the financial [services market](https://www.financedigest.com/car-rental-service-market-is-forecasted-to-grow-at-a-7-2-cagr-by-2031-comprehensive-research-report-by-fmi.html "Car Rental Service Market is forecasted to grow at a 7.2% CAGR By 2031- Comprehensive Research Report by FMI"), allowing FinTechs, agile neo banks, and other digital disruptors to shake up the traditional banking ecosystem.

On the consumer front, [expectations continue to grow](https://www.financedigest.com/cbd-skin-care-market-will-reach-valuation-of-us-816-9-mn-by-2020-and-is-expected-to-grow-at-cagr-26-for-2020-2030.html "CBD Skin Care Market will reach valuation of US$ 816.9 Mn by 2020 and is expected to grow at CAGR ~ 26% for 2020–2030") and evolve. Millennials are now the largest living generation, and they and other tech-savvy [customers want and expect](https://www.financedigest.com/how-omnichannel-cx-can-help-insurers-meet-customer-expectations.html "How omnichannel CX can help insurers meet customer expectations") engaging, highly personalized products and services. To attract new prospects and maintain the loyalty of existing customers, financial firms are increasingly turning to application programming interfaces (APIs), machine learning, [artificial intelligence](https://www.financedigest.com/artificial-intelligence-in-banking-magazine.html "Artificial Intelligence in Banking Magazine") (AI) and automation.

In the European Union (EU), regulations are an additional force spurring the 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 revised Payment Services Directive (PSD2) and General Data Protection Regulation (GDPR) [\[1\]](#_ftn1) require greater transparency from financial networks, which is leading to more consumer choice and the ability to collaborate with new FinTechs. These compliance requirements are creating new revenue potential, but they also introduce security concerns, complexity, and risk.

An additional force shaping consideration of [Open](https://www.financedigest.com/volvo-car-considers-opening-third-plant-in-europe.html "Volvo Car considers opening third plant in Europe") Banking is the proliferation of third-party players (TPPs). Account Information Service Providers (AISPs), Payment Initiation Service Providers (PISPs) and other TPPs could disintermediate EU banks, even as those [banks are in the midst of adopting strategies to balance risk](https://www.financedigest.com/strategies-banks-use-to-manage-liquidity-risk.html "Strategies Banks Use to Manage Liquidity Risk") with innovation, and competitiveness with compliance.

**The big questions**

Many [financial services firms are trying to determine how Open Banking fits into the future](https://www.financedigest.com/the-future-for-financial-services-is-digital-engagement.html "The future for financial services is digital engagement") of their firm. With so many [business strategies](https://www.financedigest.com/animal-drug-compounding-market-trends-business-strategies-and-opportunities-with-key-players-analysis-2030.html "Animal Drug Compounding Market Trends, Business Strategies and Opportunities With Key Players Analysis 2030"), options, and tools available, how do you decide which will provide the greatest value and least risk? To begin, it’s important to carefully consider these four questions:

1. **Where do you want to play?** Who do you want to be, and how brave can your Unique Value Proposition be to achieve that aim. Do you want to [remain a provider of traditional financial products](https://www.financedigest.com/skin-lightening-products-remain-sought-after-among-women-who-continue-to-account-for-80-of-sales-study.html "Skin Lightening Products Remain Sought-after among Women, who Continue to Account for 80% of Sales: Study") and services, or expand your mission to engage with consumers more actively—or some combination of the two?
2. **How will you** [engage with the market?](https://www.financedigest.com/the-patient-engagement-solutions-market-to-grow-on-a-satisfactory-note.html "The Patient Engagement Solutions Market to grow on a satisfactory note") Once you’ve defined your general direction, select a specific Open Banking model to support that direction, and take steps to put it in place. There are multiple options to select form, ranging from becoming an in-house TPP if your brand permits, or creating a new brand to house your aggregation play. Success here is dependent upon raising awareness, internally and externally, of what your financial institution is doing, where it is going and the value the new approach will offer customers.
3. **How will you win over customers?** Today’s consumers are in control, so being customer-centric is critical. [Keep asking](https://www.financedigest.com/uk-supermarkets-ask-shoppers-to-keep-wearing-mask.html "UK supermarkets ask shoppers to keep wearing mask") what a customer will gain by staying with your bank, rather than switching to another firm or Google-Apple-Facebook-Amazon (GAFA) aggregator.
4. **Which new technologies do you need?** To execute on your plans, you may be able to leverage your existing investments in compliance. In addition, you’ll almost certainly need to invest in some of the [latest technologies](https://www.financedigest.com/financial-technology-fintech-how-to-navigate-the-latest-trends-and-innovations.html "Financial Technology (FinTech): How to Navigate the Latest Trends and Innovations"), such as blockchain solutions, that can speed implementations, deepen customer advocacy and unlock new revenue streams.

**Put customers—and data—first**

[Customers expect to control their personal financial data and access services tailored to meet](https://www.financedigest.com/meeting-customers-where-they-are-through-financial-inclusion-and-hyper-personalization.html "Meeting Customers “Where They Are” Through Financial Inclusion and Hyper-Personalization") their needs. With Open Banking, it is now possible to meet [rising demand](https://www.financedigest.com/eyewear-market-rising-demand-or-trendy-and-fashionable-eyewear-drive-potential.html "Eyewear Market – Rising Demand Or Trendy And Fashionable Eyewear Drive Potential ") for these personalized, customer-centric solutions. Imagine creating more [impactful loyalty programs and more targeted marketing campaigns](https://www.financedigest.com/how-the-latest-ios-update-impacts-your-digital-marketing-campaign.html "How the latest iOS update impacts your digital marketing campaign") that are designed not only to target new customers but also to proactively retain existing customers. Those are the types of solutions that increase competitiveness and win [customer loyalty—and they all depend on data; the new economic-fuel](https://www.financedigest.com/how-payment-institutions-can-leverage-data-to-support-merchant-customers.html "How payment institutions can leverage data to support merchant customers").

Specifically, the novel products and services available [today depend on leveraging banks’](https://www.financedigest.com/stress-testing-why-did-my-bank-go-bust-today.html "STRESS-TESTING – WHY DID MY BANK GO BUST TODAY? ") own customer data, as well as third-party data lakes and data management platforms (DMPs). A flexible, scalable Open Banking implementation allows [banks to deploy as much or as little of this data as they want—and sequence and orchestrate solutions](https://www.financedigest.com/becoming-more-than-a-bank-adding-value-through-financial-solutions-as-a-service.html "Becoming more than a bank: adding value through financial solutions as-a-service") at their own pace, in their own way.

By taking advantage of data, banks can drive value-aligned propositions in the form of [digital loyalty and proactive customer relationship management](https://www.financedigest.com/the-advanced-wound-management-technologies-market-to-grow-based-on-customized-digitization.html "The Advanced Wound Management Technologies Market to grow based on customized digitization"). For example, an API-based PSD2 solution can help banks take advantage of new strategic and collaborative opportunities by providing third parties with controlled account access. Or, by integrating with a DMP, a bank could capture, unify and activate its data to [gain insights that drive more targeted and effective marketing](https://www.financedigest.com/organic-fertilizer-market-where-should-participant-focus-to-gain-maximum-roi-exclusive-report-by-future-market-insights.html "Organic Fertilizer Market | Where Should Participant Focus To Gain Maximum ROI | Exclusive Report By Future Market Insights") campaigns. For banks seeking to make loyalty programs a bigger part of their mix, a [digital loyalty-tokens platform can make it easier for consumers](https://www.financedigest.com/the-digital-intraoral-sensors-and-consumables-market-to-despise-monotony-with-digitization.html "The Digital Intraoral Sensors And Consumables Market to despise monotony with digitization") to convert, use and share points.

[**Open banking is the future**](https://www.financedigest.com/the-future-of-financial-services-how-apis-are-fuelling-the-rapid-rise-of-open-banking.html "The future of financial services – how APIs are fuelling the rapid rise of Open Banking")

[Open Banking will become more pervasive in the years](https://www.financedigest.com/four-years-of-open-banking-2022-may-be-the-best-year-yet.html "Four years of Open Banking: 2022 may be the best year yet ") ahead, which makes it imperative for financial institutions to capitalize on the opportunities and stake their claim now. That means asking the big questions and examining the best ways to use data to [create the customer-centric approach customers are demanding](https://www.financedigest.com/growth-of-mineral-processing-and-mining-industrie-is-creating-demand-for-rotary-trommel-market.html "Growth Of Mineral Processing And Mining Industrie Is Creating Demand For Rotary Trommel Market").The [time to ditch the “fast-fail” approach](https://www.financedigest.com/anti-money-laundering-time-to-take-a-new-approach.html "ANTI-MONEY LAUNDERING: TIME TO TAKE A NEW APPROACH?") has arrived, in favor of “succeed-fast”, which means rapid experimentation needs to become a key part of the organizational-culture.

With the right strategy, technology framework and partners in place, financial services providers can embrace the future—and compete and win in a [rapidly changing](https://www.financedigest.com/rapidly-changing-fashion-lifestyle-is-expected-to-spur-demand-for-clothes-closets-market.html "Rapidly Changing Fashion Lifestyle Is Expected To Spur Demand For Clothes Closets Market") marketplace or financial ecsoystem.

[\[1\]](#_ftnref1) The EU General Data Protection Regulation (GDPR) is the most important change in data privacy regulation in 20 years, http://www.eugdpr.org; Accessed December6, 2017


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