Recently, Nigeria became the first country to issue the operational guidelines for Open Banking thus becoming the first country to do this in the African continent. This is laudable achievement, and the most populous African country is known to be in the forefront of developments in the financial services industry globally.
Open Banking technology is one of the most significant changes that has disrupted the way banks operate and interact with their customers.
What is Open Banking?
Open Banking is a system that allows banks to share customer data with third-party providers through secure Application Programming Interfaces (APIs). This sharing of data enables third-party providers to develop innovative products and services that are tailored to the specific needs of the customers
Here are some ways in which open banking technology has disrupted the introduction of new products and services in the banking industry.
Encouraging innovation
Open banking has created an environment that encourages innovation. By opening up their data and services to third-party developers, banks have provided an opportunity for startups and other fintech companies to develop new and innovative products and services that meet the ever-changing needs of customers.
This has led to the emergence of new players in the market, offering a range of innovative financial products and services that were previously not available to customers. For instance, peer-to-peer lending platforms, digital-only banks, and robo-advisors have all emerged as a result of open banking.
Promoting Partnerships
This new technology has opened the doors for collaboration between banks and fintechs. Traditional banks have seen this platform as an opportunity to work with Fintechs instead of seeing them as enemies. The fact is that it is better to partner with Fintechs to introduce new products and services faster rather than deploy resources internally to develop products which might end up being failures.
With the partnerships banks and fintechs can leverage on a wider variety of technologies to develop new products and services faster and leaner.
Encouraging competition
Open banking has encouraged competition in the banking industry. With third-party developers accessing data and services from banks, customers have more options to choose from, which has increased competition between banks and fintech companies.
This has forced traditional banks to up their game and improve their services to retain customers. In addition, banks are now collaborating with fintech companies to provide customers with new and innovative products and services.
This is especially good for the customer as they financial services are now forced to compete among themselves to provide the best service to the customer
Providing personalised experience
Open banking has also improved the customer experience by providing customers with more personalized and convenient services. With the availability of customer data through APIs, banks and fintech companies can now offer tailored products and services to individual customers.
For instance, banks can now offer personalized investment advice to customers based on their financial history and goals. This has resulted in a more personalized and relevant customer experience, which is essential in retaining customers in the highly competitive banking industry.
Though it is still early days in Nigeria, companies like Okra, Mono, OnePipe have built their businesses based on Open Banking technology. With the regulation now available, it is expected that many more companies would arise in the near future.
