Skip to main content

Al Karim Somji is the founder and CEO of Zafin.

Open banking is about to change the financial sector.

New technology, platforms and initiatives such as the Advisory Committee on Open Banking created by the federal government show that open banking will transform the market and the way banks do business.

Story continues below advertisement

Many see open banking as a threat; in reality, it’s a clearer pathway to digital transformation.

As new regulations encourage greater competition from non-banking institutions, banks will need to develop new operating models to remain competitive. By developing a clear framework for how to proceed, the biggest benefit for banks will become clear: uncovering and capitalizing on data. They will be able to use data to learn more about their consumers, ultimately opening new revenue streams. By understanding the stories that motivate consumers to purchase goods, banks can modernize their offerings to create more personalized packages for each client.

The bottom line: open banking will be a catalyst for the financial data revolution.

What is open banking?

The banking industry currently operates under a closed model, reinforced by data-protection legislation. This has given banks, especially the largest players, the opportunity to own the market by becoming the primary source for banking services. Open banking seeks to change that by creating a system in which customer data can be easily, yet securely, accessed by different providers.

This means banks will no longer have the luxury of using data silos as leverage to preserve customer loyalty. Data sharing gives customers access to their own banking information and allows them to better determine their alternatives. Comparing prices from different providers will allow them to choose to do business with institutions they trust. In order to succeed in this market, banks will need to be innovative and offer more holistic, customer-centric services, which begins with mastering the new data-sharing sector.

The current risk in data sharing

Banks have traditionally viewed the protection of customer data as their responsibility and, so far, they’ve resisted data sharing. In an industry in which customers have trusted banks to keep their data safe, there will need to be a shift in attitudes about security for open banking to be successful.

As more competition enters the market, banks will need a robust security framework to protect customers from phony transactions. Banks can ensure their customers aren’t subjected to unscrupulous behavior through thorough partner vetting. Although the inherent risks of data sharing do exist, it’s critical for banks to overcome that challenge. When done correctly, banks can deliver increased security through enhanced capabilities to create deeper relationships.

Story continues below advertisement

Driving customer expectations and experiences through data

As more competitors enter the market, banks will need to understand the importance of their digital channel. Integrating digital solutions with legacy systems is a time-consuming challenge that could force banks to compromise on customer-centric strategies.

Open banking will result in customers demanding extremely personalized services. Incorporating digital platforms will allow banks to offer advanced features to meet consumers’ ever-evolving needs. Through pricing and bundling features, banks can utilize data to differentiate themselves.

Specifically, banks can go further by offering non-financial products. Rather than simply offering an auto loan, banks can offer the entire value chain to help customers buy a car. Connecting customers’ financial data with the offerings of a dealership will allow banks to form partnerships that drive purchases outside of their typical scope.

Additionally, lifestyle events have always been a valuable way to understand the greatest impact on a customer, but banks haven’t been able to leverage that in the past. By bringing all of a customer’s raw data together, banks will be able to better understand different lifestyle events, such as buying a car, to develop personalized offers.

Translating multiple experiences into one holistic lifestyle-oriented action will provide banks with a complete view of their customers. With hyperpersonalized, analytic-driven platforms, banks can more successfully navigate their customers’ data.

Taking a digitally focused step forward

Banks are beginning to face an unprecedented level of change. If they wish to survive, they must focus on digital strategy. Those that choose not to will be faced with an additional challenge: third-party players luring customers away with innovative solutions.

Story continues below advertisement

Banks that embrace open banking will set themselves apart and show their value. The technological innovation that digital banking solutions provide can push institutions to move forward quickly and confidently within a market of new regulations.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies