Open Banking Use Cases (for Users)
From a consumer standpoint, smartphone penetration has increased dramatically in recent years, facilitating mobile access to applications and services.
Deloitte consumer research, conducted by YouGov, reveals strong latent demand among a technologically-savvy population for new and improved banking services.
DBS in Singapore recently launched an API developer portal that makes available 155 services, including rewards, payments and fund transfers. These services have already been used by partners like McDonald's and Property Guru to improve offerings to customers.
By taking on the new roles of Payment Initiation Service Provider (PISP) and Account Information Service Provider (AISP) introduced by PSD2, banks can create new products and services, enabling new participants to create tailored propositions, business models and great customer experiences which amplify banks’ reach and distribution.
Consumer benefits and use cases
PISPs, for example, initiate online payments to an e-merchant on behalf of a customer, creating an alternative to card payments for both customers and merchants.
Mint.com is a leading example of an AISP, extracting and consolidating customer account information to help consumers organize and manage their personal finances. Mint currently has more than 15 million users.
Banks can extend their API development beyond the minimum regulatory requirements to offer existing customers new services (such as single sign-on, pay with credit card rewards points and credit draw-down), and export data to personal finance managers or small business accounting apps like Quickbooks and Xero.
Capital One’s Bank Account Starter API allows consumers to apply for, share some basic information, and open a savings account quickly and easily right from a third-party site.
All of BBVA’s open APIs are commercially available to its Spanish customers; a retail shopper, for example, might finance a purchase using a loan from BBVA by clicking the loan button embedded in the retailer’s checkout screen.
In the UK, through its partnership with the Post Office, the Bank of Ireland offers 2.4 million+ customers access to everything from savings and loans to foreign exchange, credit cards and mortgages at over 11,000 Post Office branches.
From the customer perspective, they are banking with the Post Office; in reality, the Bank of Ireland is the provider, using third-party partnerships to grow its balance sheet outside its home market.
These are just a few examples of banks building customer loyalty and generating new business by exporting information and services.
In the new banking era, providers must facilitate excellent user experience and simplify methods and procedures with an ever-reducing attention span.
With the development of APIs, consumers can take advantage of more than just better payment systems. Open Banking will enable better deals for deposits and savings accounts. Tailor-made credit and loan services will go beyond the rigid offerings in place today, enabling broader liquidity for consumption.
The most important characteristics of digital financial services are speed, ease of use and security. Furthermore, transparency is a must in today’s data driven economy.
Speed. A merchant can enable a purchase through the integration of direct loans at cash-out, by partnering with a financial institution via APIs. Consumers are privileged with marginal to zero interest. Thanks to the liberalization of financial services, competition among providers increases, incentivizing them to reduce costs for consumers. To put it simply, consumers can find out on the spot if they are eligible for a loan through an app, without having to go to the bank or have complex telephone conversations with bank reps about interest rates.
Ease of use. Consumers love the easy way. Open Banking can simplify banking, since APIs are all about making micro-services available to consumers through apps. APIs can give access to valuable services with just a few taps.
Security. PSD2 creates a safe space for the digital economy since banks are incentivized to open their services in a regulated but free environment. Both banks and users are responsible for their security, so the new regulation does for financial services what GDPR did for personal data. New security protocols are developed with participants motivated to maintain that security.
The banking system is somewhat taken by surprise by this new environment. Even though there will be struggle in the market, these kind of changes have historically benefited both businesses and consumers.
The amount of research and development undertaken by banks and fintechs is already spawning new industries, products and services, benefiting all parties.
Banks, FinTechs and other businesses will have new revenue streams, while consumers have a broader value proposition.
Consumers and Blockchain in a world of APIs
Since there are more than 14.000 APIs available worldwide, chances are you’ve already used a few without even realizing. This is how pervasive well-regulated micro-technologies like APIs are.
Open Banking and Blockchain share some common attributes: they are both open-source (to a certain degree), they both rely on the user for mass adoption, they both reduce costs for businesses and bring more convenience for the user.
With the advent of Open Banking, Blockchain FinTechs have open doors for a very large pool of users through the development and use of APIs. Blockchain services have features that are very appealing to traditional banks, so digital partnerships between such entities are likely to become widespread in the near future.
Blockchain technology is the best tech that we have when in comes to performing transactions, so blockchain features will likely be implemented by banks in their customer offerings.
You can read more about blockchain benefits here.
In the near future, consumers will be able to take advantage of banking and financial services with never seen before benefits and performance. People will wonder when did things change so fast, and for the better.
If you’re going to find yourself in the near future using a service, and suddenly it's way better than before, chances are you’ll be using blockchain tech via APIs, which are silently taking the world by surprise.
Open Banking is an important part of our road-map, so if you want to learn more about ZoidPay make sure to follow us on our social channels below. If you’re really curious and want a quick reply from our core team members, head down to our Telegram channel and just ask!