Open banking provides not only traditional banks and financial institutions, but also emerging fintech players with the tools they need to create truly personalized digital experiences.
Consumers today expect digital experiences to be as fast and easy on mobile as laptops, and this also applies to financial services. They want a similar experience because the techniques used in everyday life are the same. Therefore, consumers expect financial service providers to have the same level of intuition and ease of use. However, providing intuitive and personalized financial services with a simple and easy user journey while ensuring secure service is a real challenge.
Whether traditional financial service providers can meet these expectations is controversial. In recent years, a series of new “challenge” banks (neobanks) have attracted tens of millions of customers in France and Europe. Their rapid success shows the gap between consumer expectations and previously provided services. The emergence of more and more fintech companies suggests that competition will intensify.
Open banking provides traditional financial institutions and fintech startups with the tools they need to meet their user requirements, reach new segments and deliver more innovative services than ever before.
French open banking dynamics
Open banking is a global phenomenon, but its motives vary from market to market. In some markets, regulation drives open banking, while in others, the provider itself is leading the way. Second, it creates a mutually beneficial partnership that combines the strengths of existing institutions with the agility and willingness to innovate startups.
France is a combination of these two dynamics. As a member of the EU, we have implemented the Payment Services Directive (PSD2), which paved the way for open banking. Effective in 2018, PSD2 requires banks to be able to access their customers’ financial data if they want to access it through an alternative service provider. However, this requirement, as the name implies, applies only to payments.
The UK goes a step further and requires the nine largest banks to develop open banking standards for other banking services that serve as models for other markets. Thus, the UK, which has more than 200 licenses, is leading the way in open banking adoption, while France, Germany, Spain and Italy will soon follow, but the number of licenses is low.
At traditional financial institutions, not everyone is convinced of the benefits of open banking. The President of the Bank of France has questioned its feasibility and the ability of new market players to protect consumer data. Others, meanwhile, see these existing companies as an opportunity to rethink their outdated business models and establish themselves at the heart of the digital financial services ecosystem, the “super producer” of the value chain.
The first step towards open finance
Open banking paves the way for open finance, a world of personalized, bespoke financial services where information is exchanged between applications and devices to optimize the consumer experience. For businesses, this opens the door to innovation. The possibilities for developing products and services are endless. For consumers, sharing data gives them the opportunity to access more services, better manage their finances and improve their financial profile.
What happens next depends on the creativity and talent of the thriving fintech sector in France. We can already foresee many innovations. For example, you can imagine a super-personal insurance plan that more closely reflects your personal lifestyle, such as offering discounted premiums to athletes. It also provides recommendations on how much to save, how much to invest, and where to invest, based on a global approach to consumer financial profiles, personal conditions, goals, and short-term goals. You can also imagine a maid investment and wealth management service. ..
Business banking transformation
Open banking can also transform a company’s financial management. Today, companies and their accountants use tools that are not integrated with many international banking systems, such as spreadsheets, SaaS accounting software, time tracking, and memo collection systems. There is a lot of manual data processing, so there is too much room for human error and inaccuracies. Through open banking, these heterogeneous systems can be integrated for business users, saving time, providing more accurate information, and ultimately improving productivity and business performance. Companies can also reduce their exposure to fraud by using open banking to integrate invoice processing, approval, secure payments, and account verification.
For companies looking to fund growth and growth, a more accurate overview of their accounts enables faster and better decisions. Less hassle and less bureaucratic processes increase lending to previously underserved business audiences, such as those with no credit history or unusual financial conditions.
Even before it became mainstream, open banking could improve customer retention and acquisition, increase revenue, promote international expansion, and drive economic growth by offering more personalized products and services. Will be seen in inter-company services.
With the current wave of innovation and investment in FinTech, it is clear that France has its own means of growth here in the increasingly digital financial sector. Traditional financial institutions and start-ups need to adopt open banking to anticipate customer and user expectations and generate new business models and new revenue streams.