The rapid growth in online banking tool adoption and the proliferation of application programming interfaces (APIs) have caused both businesses and consumers to begin seeing the benefits of a world where traditional banks no longer play an integral part in the financial transaction process.
The global spread of API integration has also paved the way for further open banking growth. One of the most promising markets for innovation and competition in the future of commercial banking is open banking, which allows banks to share personal and financial data with third-party financial institutions (FIs), allowing even companies that are not technically banks to act as financial intermediaries without a banking license.
In the January edition of the Next-Gen Commercial Banking Tracker®, PYMNTS explores the global spread of API integration and how it has paved the way for further open banking growth and innovation.
Around the Commercial Banking Space
With a growing number of consumers using online and mobile financial apps to manage their money, they seem more likely to open their financial world to third parties to help them make their financial life faster and easier. In fact, a December 2021 report found that most consumers in the U.S. and Canada are willing to share their financial information with FinTech companies in exchange for more convenient and faster digital financial experiences. The report shows that nine out of 10 consumers in both countries use apps to manage their money, and up to 75% of them either have connected, or would consider connecting, their bank account information to financial apps and services to make financial tasks more automatic.
Meanwhile, banks worldwide are jumping on the open banking bandwagon to meet the demand, and more are offering APIs, a new report found, revealing a 17% increase in APIs offered per bank between 2020 and 2021. These new integrations are likely to fuel an explosion in new apps and products to help drive efficiencies, as well as improved digital customer experiences.
For more on these stories, visit the Tracker’s News and Trends section.
Bank of Montreal on Personalizing Functionality With Open Banking
Even in a pandemic, business must continue despite challenges that keep employees working from home and unable to interact face-to-face. As a result, commercial banks have noted a demand for products and services that can make their corporate clients’ financial processes quicker, safer and more efficient. Open banking is being eyed as the future of banking as FIs look to offer better functionality and personalized digital banking experiences.
In this month’s Feature Story, Sean Ellery, head of digital and innovation, commercial banking with BMO Financial Group, talks about how open banking can help FIs expand offerings beyond the traditional online banking platform by safely sharing financial and personal data with third parties while advocating for customers as an educator.
PYMNTS Intelligence: How Open Banking Growth Impacts Business Banking Prospects
A recent report suggests that the pandemic has propelled digital adoption forward by five years, forcing many consumers and businesses to rethink how they make payments or conduct other previously routine banking functions. This change has sparked rapid growth in the adoption of online banking tools. As a result, bank integrations of APIs have skyrocketed, spurring a rush to compete for the business of financial customers.
This month’s PYMNTS Intelligence examines how open banking has challenged the traditional bank model by opening the doors to third-party companies and FIs to become financial intermediaries without a banking license. It also looks at how open banking has launched innovation opportunities to help banks become commercial partners, as opposed to just a place to store and transfer money.
About The Tracker
The Next-Gen Commercial Banking Tracker®, done in collaboration with FISPAN, examines the latest corporate banking trends, including how businesses’ financial and payment needs are shifting and why. It also analyzes what technologies and tools could help FIs to grow the loyalty and engagement of their corporate clients.