Over the last few years, the way banks function has changed drastically. The digital revolution in the financial industry is here and banks have to modernize themselves to stay competitive, irrespective of size. In addition to this, customers today expect more from their banks and are more digitally savvy. They prefer interacting with banks and financial services online, provided security is given. Furthermore, they also expect banks to provide them with a range of non-traditional services.

Here is where the Open Banking model comes in handy. It is designed to help banks meet the changing demands of their customers and have additional monetization avenues. To put it simply, an API (Application Programming Interface) is an interface that allows for easy synchronization, linking, and connection between the database of the service with any application. Such a powerful technology ensures seamless interaction between systems, apps, mobile devices, and applications. APIs for online banking is advantageous to both the customer and the bank – and this is why more and more financial institutions are implementing the same. According to Juniper Research, the number of open banking users is expected to reach 40 million users by 2021.

API integration is already being used by a plethora of institutions worldwide, including private services such as PayPal, wherein it integrated API with Siri. and Facebook, where the platform integrated APIs of PayPal, Visa, MasterCard, American Express, and others. Some applications in need of integration include payments and settlement services, deposits and lending, eTrading and insurance, digital currencies, and so on.

With this as our base, let’s discuss why banks need API integration to expedite growth:

1. Survival:Technology is ever-changing and banks need to reinvent themselves to sustain – this means partnering with third-party apps and products and open banking. It has also become easy for customers to access the products and services of financial enterprises on third-party applications and websites. Banks need to open up APIs and capitalize on such distribution channels for survival.
2. Simplified processes:API platforms simplify difficult steps and allow data to flow easily between different platforms. When this happens, banks need not worry about time-consuming integrations as the complex procedures will be handled by software providers. This will accelerate innovation, save a lot of time and energy, and provide a seamless experience.
3. Convenient and secure:When critical financial data is shared between different parties online, there is a need for data privacy and enhanced security measures. APIs can be developed to ensure convenience along with utmost security. A great thing is that custom APIs can be created by developers that offer secure environments.
4. Aids start-ups: In India, when it comes to the fintech industry, the action when it comes to start-ups is high. This is due to the evolving customer behavior and the popularity of financial services and products online. Start-ups can create innovative products and services and improve their existing products with the help of APIs.
5. Provides benefits: Through API integration, financial institutions can create functional digital services within days, lower their costs, speed up their implementation processes, connect applications to mobile and cloud solutions, give customers an improved experience, and so on.

The way forward:

The future of digital banking is now. Banks need to use and develop APIs if they want to grow their business and make processes easier for customers. APIs have been implemented by a plethora of financial institutions and it has been hugely beneficial for them. For a successful digital banking transformation, the government, banks, and businesses should function hand-in-hand. Building sustainable financial ecosystems with the aid of technological advancements is the need of the hour for our banking systems.

The first wire transfer of funds happened in 1872. Since then, so much has changed – the world adopted ATMs, telephone banking, internet banking, contactless payments, mobile banking, and so much more. And today, we are further making way for a newfangled approach by way of human-centered banking: open banking.

Open banking is a part of financial technology that draws on open APIs and third-party developers to build applications and services that bring about greater financial transparency through open source technologies.

Open banking has fundamentally revolutionized the financial sector. It has made traditional banking services simple, efficient, and convenient, removing additional costs. Markets led by the UK and the EU have already passed open banking regulations with more than two million users of open banking-based products in the UK, a number that has doubled since the start of 2020, despite the disruption caused by COVID-19. Other markets, such as Canada, New Zealand, Australia, and so on, are also on the road to open banking.

Customer demand is now undertaking a paradigm shift, and the expectation from banking models have increased drastically. They want seamless, intuitive, and value-added services along with safe and secure systems and procedures. With more customers understanding the value of their data, banks are forced to opt for newer working models.

Additionally, it unlocks a new way of functioning: for Third-Party Providers (TPPs) to aid banks and companies in providing innovative solutions.

The primary beneficiaries of the open banking landscape are the end-users. The quality of services provided through the spectrum of open banking to customers has improved drastically in the following ways:

• Ability to track changes in bank accounts and receive regular notifications without the need for authentication every time.
• Complete automation when it comes to analytics and budgeting recommendations.
• Execution of transactions via a single interface, even if made through different payment modes.
• Choosing optimal payment methods depending on the offers and discounts available.
• Passing online verification when opening a new account/register.

For banks, open banking can help strengthen customer relations and be considered safe and secure data holders. Their profitability will depend on the ability to fulfill customers’ needs. With open banking, banks can cater to customer needs in a future-proof and agile method.

Open banking also involves educating and engaging customers about the technicalities and the value of their data. . Such transparency will give them access to better services and improved pricing.

Since the concept of open banking is relatively modern, a lot of end-users are hesitant to use these services. It is now up to the government and financial regulators to raise awareness and encourage users to opt for open banking services.

Jim Marous put it aptly: “Having a customer-centric culture is more than just a good thing – it’s become a matter of survival.”

You don’t need a Magic 8-ball to tell you that the time for open banking is now. The question is, have you made the shift?