If you rarely think about your bank in terms other than interest rates, banking fees, minimum balances and maybe ATM accessibility, you are not alone. With savings interest rates currently sitting at less than 1% in the United States, banks are likely not a favorite topic anyway, and you definitely don’t spend much time thinking about their infrastructures. The recent rise of open banking, however, is ultimately a consumer win and worthy of some attention.
Increased Competition
The emergence of the fintech API is driving prices down in the overall financial industry at the same time it is driving up the number and type of financial services. Providing an expansive set of banking services used to be cost-prohibitive to banking institutions. However, open APIs make it possible for financial startups to offer service variety to consumers, driving established banking institutions to follow suit.
Consumers can also use financial service aggregators, who utilize these APIs, to compare offers between banks and other institutions, driving up competition among providers and thus giving you more options at a lower price.
Robust Experience
Gone are the days of the handwritten savings and check registers. Consumers today can easily save banking information in a variety of third-party bookkeeping software, which enables you to set up robust personal or even small business bookkeeping that manages multiple accounts with ease.
With the number of fintech startups that use these APIs increasing almost every day, you can rest assured that the connections upon which your chosen bookkeeping system sits are likely to persist long-term.
Investment Management
As your portfolio of investments grows, you may move from managing one savings account to having money in one or more 401(k) accounts, multiple savings accounts, one or more Certificate of Deposit accounts and even more. Not only is it difficult to track and manage multiple investments that sit in many places, but that can be a risk to a family’s security if something happens to the person who typically manages the finances.
Open banking and its APIs enable financial advisors to gather clients’ information together in one place with ease and offer central management and optimized services along with increased peace of mind.
Streamlined Payment Processing
Online shopping continues to increase, and behemoths like Amazon gain market share by streamlining the purchase experience. Many consumers may forego shopping around and go straight to Amazon because they know their purchase information is stored and won’t require additional input. The use of services like PayPal allows independent vendors to at least avoid rekeying of credit card information but does require additional off-page logons.
Fintech APIs are driving expansion in payment processing options for online vendors that allow for seamless checkout experiences that allow consumers to stay on the vendor’s pages.
Takeaway
Open banking may not be on the top of your mind each day, but the enhanced consumer experience and increased options it drives are undeniable. You will continue to benefit from greater service variety, lower overall financial service prices and even increased security as open banking matures.
