API

Open Banking Strategy to Retain & Acquire Corporate & Retail Customers

Read how an open banking strategy can help banks in retaining corporate customers and acquiring retail customers.


The open banking market is booming because it benefits consumers by allowing different entities to exchange data easily and securely. By using application programming interfaces (APIs), third-party financial service providers are able to access consumer banking, transactions, and other data from banks and NBFCs. This secure exchange of information between parties is what makes open banking such a success.


A lot of people are using new wave apps and services, which is the major factor driving the growth of the open banking market. Furthermore, benefits like customer engagement and convenience for all parties involved in the financial services sector are promoting the growth of open banking. However, the open banking market growth is expected to be restricted by an increase in events of online fraud and data insecurity. On the contrary, the significant increase in the collaboration of financial service providers and traditional banking with FinTech is expected to be propitious for the open banking market growth.

The global open banking market size is expected to grow from $15.13 billion in 2021 to $19.14 billion in 2022 at a compound annual growth rate (CAGR) of 26.5%. The global open banking market size is projected to reach $123.7 billion by 2031 growing at a CAGR of 22.3% from 2022 to 2031.

The popularity of online platforms for payments is driving the open banking market. The digital payment system is expanding with developing payment methods, increased e-commerce use, improved broadband access, and the advent of new technologies. Payment gateway APIs are used by online platforms such as PhonePe, Paytm, and Google Pay to manage recurring billing. For example, in August 2021, Google Pay crossed 1 billion transactions. With the ever-growing trend of people using digital platforms to make payments, it's no surprise that the open banking market is expected to see a rise in growth. In July 2021 alone, PhonePe, a digital payments network, set a new milestone by processing 1.5 billion transactions through the unified payments interface (UPI).

 

Segment overview

Open banking is a growing industry, and it's important to understand the different aspects of it. The market is studied based on financial services, distribution channels, and regions. Financial services can be divided into bank & capital market, payments, digital currencies, and others. Distribution channels include bank channels, app markets, distributors, and aggregators. Regions include North America, Europe, Asia-Pacific, and LAMEA. By offering financial services, banks & capital segment acquired the majority of the open banking market share in 2020.

There are a few factors that have contributed to the open banking market's growth, especially in Europe. For one, banks and other financial institutions have realized the potential of open banking services to collect customer data and expand their reach. Additionally, the concept of open banking is still fairly new, so there's a lot of potential for growth in this area. Security is also a key concern for many people when it comes to online payments, so open banking platforms that offer increased security are likely to see more adoption in the future. Another factor supporting the growth of this market is government directives requiring banks to open APIs.

Open Banking Market by Financial Services

 

COVID-19 Impact Analysis

The outbreak of COVID-19 has caused a significant change in the open banking industry. Because of the pandemic, more customers are using APIs to carry out payment processes. The trend of open banking is experiencing massive growth due to technological advancements. Banks and fintech companies are providing customers with useful features in APIs to promote the use of open banking platforms. As a result, this has become one of the major growth factors for the open banking market during the global health crisis.

 

Top Impacting Factors

Open banking: benefits and potential

Open banking can make a difference to everyone involved in the financial services industry - from everyday consumers to businesses, Fintech companies, banks, and financial institutions. When open banking is implemented across the industry, customers gain access to better banking services and innovative, personalized financial products. They also have more choice when it comes to service providers for their financial needs. Open banking forces banks to offer more personalized and relevant product options to customers by understanding their demographics, requirements, and other trustworthy financial information like KYC documents. These customizations help a customer in the decision-making process and improve the overall value of the financial service/product. Open banking is an convenient way for banks to expand their services. The open banking platforms are beneficial to banks because they allow for a better understanding of both their customers and competitors. Open banking helps banks to improve their services and product offerings, and to deliver better customer service and engagements. Open banking offers easy operations that help customers to access the required information in a consolidated form. Further, it enhances centralization model for the banking services. Through these banks achieve full control over various services, such as loans, transfers, and financing, which are offered to the customers.

 

A rise in the adoption of new applications and services

Open banking has helped customers in a few different ways. For starters, it provides a consolidated view of their accounts from various financial service providers. This not only helps manage customer data but also their money. In addition, these applications offer advice for improved wealth management. By using open banking and other digital services, customers can get a better handle on their finances. According to the Forrester Research report 2019, a total of 34% of European adults use an application or bank’s mobile website for banking activities. Furthermore, 64% of adults are expected to adopt open banking in the coming years. In addition, open banking is expected to create a new and advanced channel for banks to connect with customers. This is also anticipated to provide an opportunity to the third-party services for the development of better applications and services. According to the Forrester Research report 2019, a total of 34% of European adults use an application or bank’s mobile website for banking activities. Furthermore, 64% of adults are expected to adopt open banking in the coming years. In addition, open banking is expected to create a new and advanced channel for banks to connect with customers. This is also anticipated to provide an opportunity to the third-party services for the development of better applications and services. This offers financial institutions opportunities to launch applications and to improve their overall open banking experience.

 

Open banking APIs have improved customer engagement overall

The open banking API provides customers access to application programming interfaces (APIs) belonging to banks and financial firms. With this, firms can offer innovative services to third parties and banks. This, in turn, provides growth in revenue.

 

Third-party apps and software are increasingly used by consumers to manage their finances

Aite Group's survey found that 44% of small business owners use non-bank service providers, such as online personal finance tools or apps, for financial transactions. 63% of consumers do the same. This interconnected web is made possible by open banking, which simplifies interactions between third-party applications and the financial institution by creating a space where all parties share data. In this connected space, consumers find it easier to move money, manage finances, and complete financial transactions.

In its most basic form, an API is a set of tools that different systems can use to communicate with each other. This can be done in a number of ways, but typically it involves some sort of code that enables one system to access data from another. A good example of this is the Mint app, which allows users to see all of their financial accounts in one place. In order to make this happen, Mint uses an API to connect directly to the various financial institutions where the user has accounts.

 

6 Reasons Why Open Banking Should Adopt an API Strategy

  1. Adhere To Compliance:
   

The primary motive for banks to implement open banking is to meet compliance standards. While this may not generate additional revenue, it is necessary to maintain the bank's operations. In other words, compliance improves profitability by preventing costly penalties.

  2. Improved Digital Swiftness:
   

A challenge for open banking is being able to securely, quickly, and efficiently share data. Many banks are redesigning their data architecture and employing an API-based microservices approach to make data more accessible.

  3. Higher Customer Satisfaction:
   

Open banking provides customers with a lot of advantages in terms of the number and types of financial services available to them. From the perspective of banks, this might not seem so great at first, because it allows other companies to make use of customer data that was previously only accessible to banks. However, a wider range of financial service integrations ultimately results in a better experience for customers, who are then less likely to look for other options. As the saying goes, when one person succeeds, everyone around them benefits as well since customers are more satisfied with their banking experience, they are less likely to churn. This increases customer lifetime value and improves long-term profitability.

  4. New & Premium API Products:
   

Open banking provides customers with a lot of advantages in terms of the number and types of financial services available to them. From the perspective of banks, this might not seem so great at first, because it allows other companies to make use of customer data that was previously only accessible to banks. However, a wider range of financial service integrations ultimately results in a better experience for customers, who are then less likely to look for other options. As the saying goes, when one person succeeds, everyone around them benefits as well since customers are more satisfied with their banking experience, they are less likely to churn. This increases customer lifetime value and improves long-term profitability.

  5. New & Wider Client Base:
   

Open banking has been a hot topic lately, with many people focusing on the benefits of sharing data with others. However, it’s important to recognize that open banking is a two-way street: in other words, it will allow banks to gain access to user data from other participating financial institutions. This creates a massive opportunity for banks to create their own integration-based financial products and services. Banks able to move fast to develop a modular business and technical architecture can leverage their brands to dominate parts of the value chain.

  6. Lot of Potential for Collaboration:
   

Open banking's original purpose was to give third-party financial service companies access to customer data. However, if banks are willing to go even further, they can actively help these companies. Doing so has a whole host of benefits. For example, banks can offer additional functionality, dedicated support, or even developmental collaboration to chosen third parties. In exchange, these third parties can return the favor with various non-monetary offerings, such as additional product functionality for the bank in question or cross-branding.

 

How API Hub's Help banks and Financial Institution in customer retention

Fable API Hub

API Hub is a simple and easy way to connect your bank system to your corporate ERP systems. You can build a customer base irrespective of the multiple ERP solutions and different database types. API Hub is flexible and can integrate various business applications with their existing ERP solutions in a secure and scalable manner.

In the corporate world, you not only have to manage your internal information flow but also need to cater to the needs of multiple customers by providing them with various services. This can be quite challenging unless you have enough time and resources to constantly manage your customer’s data and keep them updated. As a market leader in providing Software as a service (SaaS), Fable Fintech’s API Hub facilitates this. It is a revolutionary solution that allows you to reach out to a large customer base, irrespective of their ERP vendor and database. Using API Hub, your bank or non-banking financial institution can provide your customers with a single portal where they can get access to all their data and information.

 

Why API Hub is the better choice for your business?

The best way to grow a customer base is by making business in the day to day easier for your customers. If you are a business that has multiple ERP solutions and different database types, then you will agree that it becomes really hard to manage your customers. You will have to create multiple connections for each ERP solution and database type. In addition, you will have to deal with multiple user management, user permissions, billings, and subscription management for each connection.

If you want to grow your business in a fast and reliable way, you need to make sure that you are doing everything that you can to help the business. This means growing your customer base, giving existing customers every chance to stay on and keep using your services. In the modern world, the customer base is more important than ever before. There are a lot of businesses that use the customer base to help them improve their ways of working and transition to future-ready ways of working. Embracing and driving this change is crucial for businesses.

 

Why use API Hub over other applications?

API Hub is a platform that allows you to get all your business data from all the ERP and CRM solutions in one place. It provides a unified API for all your business data, which allows you to consume data from multiple cloud applications and databases, irrespective of their technical sophistication levels. API Hub is hosted in the cloud, which means you don’t have to worry about managing it or installing it on your servers. The best thing about API Hub is that it is simple to use since all you have to do is call one API and get all your data.

 

How can API Hub help with business agility?

Corporate clients are a challenge to acquire. Many of them use on-premises ERP systems, which are rightly perceived as complex, hard to install, and even harder to maintain. However, there is a way to make your corporate clients move away from their own systems and embrace the cloud. The solution is to offer them a custom API to integrate your cloud-based solution with their existing on-premises systems. API Hub is a cloud platform for managing web APIs that enables your API end users to connect with your cloud-based solution. API Hub integrates seamlessly with multiple ERP and database systems, making it a reliable API management solution. API Hub helps you develop, deploy and manage both simple and complex APIs and provides additional functionality through its own services, including security, communication and monitoring.

 

Advantages of reusable API in open banking

Banks are in an industry where they have had to face the brunt of changes in technology. These industries are known to be risk-averse and do not attempt to innovate as much as others. However, there is a new openness to innovation and technology in the banking sector. Banks across the world are increasingly investing in technology to become more efficient and improve customer experience. In a recent report, it was revealed that the top 10 banks in the world with cutting-edge technology are seeing a rise in profits. Banks are using data to improve their customer experience and make their lives easier. With the help of APIs, banks are able to offer a wide range of services. The open banking movement allows the banks to increase their customer base and reach by providing more value-added services. The new customer base can be acquired through the use of reusable and open APIs.

Banks and other financial institutions are increasingly turning to open banking APIs to access account data, which is a good thing for the consumer, but it’s also a great opportunity for third-party companies to help banks generate more revenue. The idea of a third-party company offering a service for free is unheard of, but when it comes to open banking APIs, it’s becoming a trend.

Fable Fintech offers domain expertise and proven technology platforms to banks for all their domestic and cross-border payments needs.

With over 40+ large and complex deployments across 12 countries, and 9 out of 10 private sector banks in India already using the platform, Fable is a preferred partner for most banks.

Contact the experts at Fable and make your open banking offering scalable and future-ready.

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