Basically, open banking is a system under which banks open up their application programming interfaces (APIs) for third parties to develop new apps and services. Since the outcome of open banking is ultimately competition, many financial institutions (FIs) have been reluctant to take action. Hence, regulators have been the key driver of open banking’s spread. Also, the pandemic underpinned a growing need for flexible financial services, people want the ability to conduct transactions anywhere, anytime, and expect banking tools to seamlessly interact with third-party services. Latest survey data shows that 43 percent of people/users say that they’ve changed the way they bank. Therefore, combining flexibility and security is now critical for banks.

Interestingly, APIs facilitate communication between two disparate pieces of software. APIs for banks, make it possible to expand service offerings without reinventing the digital wheel. Also, APIs give financial services institutions the ability to connect seamlessly to businesses. APIs can also facilitate income growth across B2B segments. Nearly 90 percent of survey respondents said they planned to leverage APIs for revenue generation. Therefore, APIs underpin the efficacy of open banking initiatives. For the sake of providing seamless data access, interoperability and security across multiple vendors and other financial institutions, multiple APIs are required, each with a specific purpose.

As open banking adoption numbers are growing, security, privacy and fraud remain legitimate concerns. So, a primary risk for banks and third-party providers is how to ensure data privacy and security beyond banking systems if fraudsters take advantage of APIs. In order to combat this, banks must be able to both identify and eliminate third-party API risks. Therefore, multi factor authentication tools along with artificial intelligence and machine learning frameworks capable of analyzing data and payment histories can be useful to detect suspicious activities. Luckily, underpinned by APIs and safeguarded by solutions such as MFA, AI and machine learning, open banking initiatives make it possible for banks to offer flexible finance options that meet consumer needs without compromising security.

At present, open banking and its reforms are reshaping the financial landscape. So, APIs are no longer considered as technical interfaces but as products and are proving to be essential for many use cases which include, acquiring more data, improving customer satisfaction, creating new revenue streams and embracing new lifestyles.

Increased competition will bring the best out of banks as well. Moreover, open banking is not here to put traditional banks out of business. It's only an opportunity for them to rise up to the challenge and take steps towards a more digitized future. Hence, it's not a coincidence that traditional banking institutions have recently released apps and online banking solutions for their customers. Fortunately, banks are seeing the fintech evolution happening right in front of them and they are embracing change by adopting the new tech.

Group Futurista is glad to present to you the opportunity to learn more about Open Banking API and the benefits it can entail for your business by joining the 'Future of Open Banking API for FI' virtual summit with revolutionary keynotes, case studies, and an amazing selection of industry-leading speakers who will come together to share their valuable insights.

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