# Tomorrow’s Finance: The Latest Innovations in Open Banking
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-01-20
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: The Future of Open Banking: Driving Innovation in the
Meta Description: Discover how Yolt Technology Services is revolutionising the financial services industry with innovative open banking solutions like payment initiation
URL: https://financedigest.com/tomorrows-finance-the-latest-innovations-in-open-bankinghtml

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_By **Leon Muis,** Chief Business Officer at [YTS](https://yts.yolt.com/?utm_medium=organic&utm_source=AltFi&utm_campaign=AltFi_partnership&utm_content=AltFi_article)_

For the banking sector, standing still is the same as falling behind. Innovation has become the currency on which banking services are built, with new digital initiatives fundamentally altering the customer experience and raising the bar for the industry at large.

As technology takes centre stage, the term ‘challenger bank’ has almost become a misnomer, with the digital-first sector winning an additional [6 million customers worldwide](https://www.statista.com/topics/6290/challenger-banks-in-the-uk/) in the latter half of 2019.  The pandemic, while having an all-round devasting impact on the economy, is only likely to have increased this figure, as more consumers seek the frictionless convenience of using [digital banking services](https://www.financedigest.com/major-myths-and-questions-holding-banking-and-financial-services-back-from-full-digital-id-adoption.html "Major myths and questions holding banking and financial services back from full digital ID adoption").

Last year, for the first time ever, digital-first and digital-native banks [overtook traditional high street banks](https://tearsheet.co/4-charts/new-study-challenger-banks-overtake-traditional-banks-in-customer-satisfaction-in-4-charts/). Not in terms of customer numbers, but in terms of customer _satisfaction_. It’s this demand for a smoother, frictionless and personalised experience that’s driving innovation, and if financial [service providers](https://www.financedigest.com/can-companies-minimise-their-dependency-on-cloud-service-providers.html "Can companies minimise their dependency on cloud service providers?") are to stay relevant and competitive, they simply cannot afford to stop expanding their digital capabilities.

As the consumer experience becomes more joined-up and seamless, digitally-minded banks are discovering the benefits of forging open [banking partnerships to expand their ecosystem](https://www.financedigest.com/transforming-the-retail-banking-ecosystem-its-all-about-technological-innovation.html "TRANSFORMING THE RETAIL BANKING ECOSYSTEM: IT’S ALL ABOUT TECHNOLOGICAL INNOVATION"). For example, banks are using ready-made APIs available through third-party providers such as Yolt Technology Services to power Account Information Services (AIS) and gain better [customer insights.](https://www.financedigest.com/insight-into-tomorrows-retail-banking-customers.html "INSIGHT INTO TOMORROW’S RETAIL BANKING CUSTOMERS"), helping them ‘fit into’ the convenience-driven lives of today’s consumers. This, at its core, is what [open banking](https://www.financedigest.com/isnt-it-time-open-banking-delivered-for-businesses.html "Isn’t It Time Open Banking Delivered for Businesses?") is all about.

[**Open for business**](https://www.financedigest.com/apis-open-banking-and-new-business-models.html "APIs, Open Banking and New Business Models")

Open [banking has been a pioneering force in the financial services sector since the UK’s Competition and Markets](https://www.financedigest.com/improving-reputation-in-the-banking-sector-through-marketing-communications.html "IMPROVING REPUTATION IN THE BANKING SECTOR THROUGH MARKETING COMMUNICATIONS") Authority (CMA) insisted banks give customers the ability to share account data with third-party providers in 2018. It had two overarching objectives: to allow financial [service providers to offer faster and smoother consumer experiences and foster competition and innovation](https://www.financedigest.com/financial-services-tech-tools-to-foster-innovation.html "Financial Services: tech tools to foster innovation"). This involves revolutionising everything from payment solutions and budgeting tools, to lending applications and credit evaluations.

One of the most significant ways in which financial services [companies](https://www.financedigest.com/why-financial-services-companies-should-consider-rfps-in-their-digital-transformation-strategies.html "Why financial services companies should consider RFPs in their digital transformation strategies") are evolving is by tapping into payment initiation services (PIS), account initiation services (AIS), and data enrichment (DE). As such, firms are increasingly looking at where each of these services can add value, and how they might shape the [future of the industry](https://www.financedigest.com/healthy-fat-free-snacks-market-2022-outlook-current-and-future-industry-landscape-analysis-2031.html "Healthy Fat-Free Snacks Market 2022 Outlook, Current and Future Industry Landscape Analysis 2031") as a whole.

**Payment Initiation Services (PIS)**

Credit [card payments have long since been the go-to method for customers](https://www.financedigest.com/can-banks-acquire-customers-with-biometric-payment-cards.html "Can banks acquire customers with biometric payment cards?") to complete their purchases, but as any business will attest to, this comes with some drawbacks. It’s not only expensive, but settlement windows can also delay the transfer of funds. PIS solves this problem, allowing customers to pay vendors directly from their bank [accounts](https://www.financedigest.com/community-fintech-11onze-to-launch-el-canut-a-super-app-offering-universal-banking-accounts-and-digital-debit-cards.html "Community fintech 11Onze to launch – EL CANUT – a super APP offering universal banking accounts and digital debit cards") while only having to confirm with their bank. This makes payments faster, more secure, more cost-effective and it puts [control firmly into customers’](https://www.financedigest.com/theres-a-fine-line-between-relinquishing-control-and-accountability-financial-institutions-must-balance-both-to-successfully-cloudify-operations-and-meet-customer-expectations.html "There’s a fine line between relinquishing control and accountability. Financial institutions must balance both to successfully cloudify operations and meet customer expectations") hands.

These benefits have driven PIS to become popular within financial [services](https://www.financedigest.com/how-advanced-self-service-technologies-are-changing-the-face-of-finance.html "How Advanced Self-Service Technologies are Changing the Face of Finance"). Yolt Technology Services’ (YTS) recent Unlock the Value 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") report found that 67% of banks, commercial lenders, investment platforms, PFMs, and retailers, were using PIS, significantly more so than AIS or DE.

Retailers in particular, who stand to gain the most from PIS and the [reduced transaction fee costs](https://www.financedigest.com/simple-ways-to-reduce-business-costs.html "Simple Ways to Reduce Business Costs") they bring, look set to incorporate the service into their operations on a wider scale in 2021. YTS’ Unlocking Value report found that over half (56%) of retail companies not [yet using open banking](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 ") systems saying they were strongly considering adoption.

**Account Information Services (AIS)**

When it comes to lenders assessing credit applications, or [banks opening new accounts for customers](https://www.financedigest.com/why-poor-customer-communication-is-holding-open-banking-back.html "Why poor customer communication is holding open banking back"), time is of the essence. Customers want to be served quickly; the more they’re waiting around for lengthy credit checks, the more likely they are to have a poor [experience or even take their custom](https://www.financedigest.com/the-next-generation-of-customer-experience-in-banking.html "The next generation of customer experience in banking") elsewhere. That’s where AIS [comes to the rescue of banks](https://www.financedigest.com/why-pay-by-bank-app-will-come-into-its-own-in-2022.html "Why Pay by Bank App will come into its own in 2022 "), lenders and other financial service providers.

With it, [businesses can build up an accurate picture of customers’ finances](https://www.financedigest.com/business-finance-the-fintech-evolution.html "Business finance: the fintech evolution") – from bank balances and income, to expenses and spending habits – all available instantly, digitally and securely without the need for physical copies. In practice, this can [virtually halve the time it takes for a customer to open an account or secure credit](https://www.financedigest.com/more-businesses-investing-in-assets-like-virtual-credit-cards.html "More Businesses Investing In Assets Like Virtual Credit Cards") on a purchase.

Adoption has been largely successful when it comes to AIS. In November 2020, there were 653 million API calls on AIS connections, mainly instances of people using apps and other websites to use their account information. This number only looks set to grow in 2021, with around 46% of respondents in the Unlock the Value of Open [Banking reports stating they were considering adopting open banking](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") technology, or another service like AIS.

**Data Enrichment (DE)**

In many ways, data enrichment is the [next logical step](https://www.financedigest.com/eu-leaders-to-discuss-next-steps-on-energy-ukraine.html "EU leaders to discuss next steps on energy, Ukraine") from AIS. It allows businesses to turn the data gathered by AIS into valuable insight that can be used to tailor services and make [critical](https://www.financedigest.com/marketing-communications-is-a-business-critical-pillar-now-and-in-a-post-pandemic-future.html "Marketing Communications is a business-critical pillar now – and in a post pandemic future") business decisions. The data collected by AIS, such as [consumer spending](https://www.financedigest.com/as-consumer-spending-increases-convenience-and-security-have-never-been-more-important.html "As consumer spending increases, convenience and security have never been more important") habits, is invaluable when it comes to carrying out credit assessments – but what if businesses could extract even more value from the data? Using data enrichment methods, a [business such as a retailer could use this information to predict consumer trends](https://www.financedigest.com/new-report-of-fuel-conditioning-system-market-with-size-growth-drivers-market-opportunities-business-trends-and-forecast-to-2028.html "New Report Of Fuel Conditioning System Market With Size, Growth Drivers, Market Opportunities, Business Trends And Forecast To 2028") or target products more effectively.

However, despite DE complementing AIS, only 34% of respondents in YTS’ [Unlocking Value report stated they use data](https://www.financedigest.com/three-ways-data-unlocks-business-value-for-financial-organisations.html "Three Ways Data Unlocks Business Value for Financial Organisations ") enrichment services, compared to 57% using AIS. More must be done by [open banking advocates and those which have already adopted data enrichment services](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") to highlight the additional benefits it can bring to the business.

**Brighter future**

It’s these [services and more that are laying the foundation for the future of open](https://www.financedigest.com/how-open-source-technology-is-securing-the-future-of-financial-services.html "How open-source technology is securing the future of financial services") banking. From mortgage lenders to pension providers, the entire financial sector is collectively raising the bar for [customer service](https://www.financedigest.com/any-business-can-now-offer-their-customers-financial-services-how-embedded-finance-is-reinventing-the-wheel-when-it-comes-to-banking.html "Any business can now offer their customers financial services: How embedded finance is reinventing the wheel when it comes to banking") through interoperability and the intelligent use of APIs.

And the FCA’s recent call for input on [Open Finance](https://www.financedigest.com/delivering-on-the-potential-of-open-finance.html "Delivering on the potential of open finance") suggests the possibility of regulation being brought in, with a common set of principles for financial services to abide by when it comes to things such as API maintenance. This would set a stronger foundation for open [finance and help build collaboration in the sector](https://www.financedigest.com/the-importance-of-role-models-and-policy-in-encouraging-more-women-to-pursue-careers-in-the-finance-sector.html "The importance of role models and policy in encouraging more women to pursue careers in the finance sector").

The hope for [open finance](https://www.financedigest.com/open-finance-the-next-step-for-global-digital-transformation.html "Open finance – the next step for global digital transformation") advocates should be that customers will be able to access their financial footprint with the swipe of a thumb in the not-too-distant future, making life easier not just for financial services providers, but for everybody.


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