The genesis of the concept of open banking stems from the introduction of PSD2, the EU initiative to contribute to the development of a more open and collaborative financial ecosystem. But what exactly are we talking about when we use this expression?
Open banking is a concept that identifies a new way of "banking" in which banks share the financial information of their customers - based on their prior authorisation - with third parties (Third Party Provider – TPP) through open APIs, which enables the exchange of data between company platforms.
The new European regulation injected further impetus to the entire fintech sector, actually opening new doors in other related sectors such as insurtech - the technological evolution of processes and services related to the insurance world - or by creating new opportunities for the application of blockchain technology in the open finance sector.
The revolutionary aspect for the banking system concerns the management of the financial data of its customers. Always protected exclusively by banks, thanks to the advent of PSD2, these personal data are also provided to other players, not necessarily operating solely in the financial sector, based on the customer's authorisation and in compliance with the provisions of GDPR, the General Data Protection Regulation established by the European Union, in force from 25 May 2018.
Open banking has increased competition and prompted banks to also change their business models which, on seeing an increase in the stakeholders, partners and potential customers, have restructured their offering and commercial targets. Not only that, banks are starting to become platforms by adopting platform economy models, i.e. economies in which value is created and exchanged between people, organisations and resources thanks to technology, typically the preserve of other companies like Amazon, eBay or Uber just to cite some examples in other sectors.
A delicate and fundamental topic in this area is certainly the management of personal data and the sensitivity of the end customer to their sharing with companies. In reality, a recent survey¹ showed that 76% of respondents would be in favour of sharing some personal data in return for payment, a sign that the consumer is ready to willingly accept the revolution of open banking.
Therefore, new opportunities are also created for end customers, who can count on a more extensive offering of financial services, no longer provided exclusively by their bank but also by third party companies, not necessarily direct competitors of the institution.
The most representative example is the possibility of managing your current accounts, opened at several banks, using the preferred banking app. In fact, increasingly more institutions are offering the opportunity to also manage active accounts at other banks: customers need only to authorise access to their accounts from the banking app they have decided to use to display, for example, their statements on a single touchpoint.
The potential is not limited, however, to account management. Seven out of ten consumers would like to receive tailored offers in real time² and with the exchange of data made possible by PSD2, finally also open finance can contribute to the construction of personalised solutions for retail customers.
The increase in the offer then also translates to a reduction in costs, an expectation shared, among other things, by 70% of consumers, and greater ease and speed of use, requirements picked up on from 68% and 54%, respectively, of banking customers, according to Capgemini³. Many financial companies have taken steps in this direction, by creating new banking concepts, targeting a younger target audience with light banking services, such as, for example, HYPE, a company forming part of our corporate group.
The open banking ecosystem is expanding today in Italy and includes companies that are growing in terms of offers and partnerships. Fabrick, the group which Axerve is part of, is among the leading companies in this sector, with more than 500 connected banks and over 220 counterparties that use the 510 APIs published on its platform, exceeding 2.5 million “calls” per day.⁴
Although in January of this year, just 2 Italian banks out of 33 had integrated the customer authentication processes according to the PSD2⁵ directive, it is wagered that the adjustment into line with the European regulation will be an opportunity for the entire system not only to fulfil the requirements of the Union, but also a chance to review the strategies to complete the necessary steps to achieve the longed-for more open and collaborative system.
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