What is Open Banking?
Open banking is one of the hottest buzzwords in the finance sector. The term refers to the practice of combining banking data and third parties through API’s (Application Programming Interface) with the aim of creating added value to all parties involved, but most importantly to the end customer.
For example, if a developer startup comes up with the idea of providing a new cost-sharing service for people living in a shared apartment, the bank gives the background service if the customers grant access to their account information. This is just one, quite simple example of the possibilities of open banking.
Some concerns and fears have raised from the idea of opening the – often very personal –banking data. Open banking doesn’t equal the loss of privacy. No service or application provider can automatically get access to account or credit information without the customer’s agreement.
But, when the customer permits, for example, to automatically apply for a loan or charge their account while renting a car or purchasing a new sofa, transactions with third parties become more convenient and efficient from the customer’s point of view.
That’s briefly what the end customer can get from open banking and its applications. Another critical part is the application provider. Open banking makes it possible for aspiring developers that have great business ideas to partner with big players in the finance sector. This accelerates innovation and brings new possibilities for startups to scale their business.
We at OP Developer encourage all developers to get familiar with our partnership possibilities. We need each other. Also, all feedback from the developer sandbox and APIs is more than welcome. Developers we're doing this for you
Many great ideas are already in the pilot phase. This spring, we organized Open Banking Partnership Program to accelerate the innovations where a big finance company can team up with small, agile developers. The four finalists are great examples of what open banking can provide: help for planning and taking care of one’s personal or small business’ finances in a whole new, semi-automatized way.
What will happen to traditional banks?
So what does open banking mean to the traditional banking and competition in the field? It opens doors for new actors to enter the finance and banking industry. It also allows different banks to access each other's data which increases the competition. This change in the field brings the end customer many benefits as it can efficiently operate with several banks and other parties. The traditional banking will likely take a smaller role in the background of all transactions, but it definitely will not fade away or be entirely replaced with new services.
The banking sector has already evolved during the last decades first from branches to call centers and later to online banking. Open banking is the logical next step that makes service faster and more diverse. Every time a new service or transaction channel has been introduced, some concerns have raised since banking data is sensitive and strictly secured. Privacy regulations will not disappear, and the customer has their say on whether or not they are willing to open their data.
OP has a strong background in finance and banking. It is one of Europe’s most solvent banks, and very attached to its customers' everyday life. OP’s new strategy has already led to the company taking over other businesses in addition to banking, for example, traffic services and healthcare. These new moves provide a fertile ground for open banking applications since functions from different fields are already present.
But the aim is to grow the network of developers and partners to maximize the benefits of new technologies, APIs and open platform ecosystems. This makes customers’ life easier and also allows OP’s staff to focus on tasks that essentially need the human touch – such as being there for the customers at the critical touchpoints.
Even if competition gets fierce and it is easier than ever before for customers to make bids between different service providers, we at OP are confident about our strong position as a steady Finnish financial group. New possibilities evolving from the open banking ecosystems will likely make our market share even more prominent in the future.
Based on an interview with Anders Stenbäck, Digital Director at OP Financial Group and Kaisu Christie, SVP Banking Products and Services at OP Financial Group.