Open Banking: Reshaping our Relationship with Money
In an era where central banks grapple with monetary policy effectiveness and developing nations struggle with financial inclusion, standardised financial data could reshape how we approach these persistent challenges.
Through real-time transaction insights, enhanced credit assessments and AI-driven financial guidance, open banking promises tools that extend far beyond simple account aggregation.
Barath Narayanan from Persistent Systems, Carlos Kazuo Missao of GFT and Nicolas de Genot de Nieukerken at SBS examine how breaking down data silos might transform everything from credit access in rural communities to the agility of economic policymaking—and whether these changes could fundamentally alter society's relationship with money over the next decade.
How might open banking reshape society's relationship with money over the next decade?
Barath Narayanan, Global BFSI and Europe Geo Head, Persistent Systems
Open banking has the potential to revolutionise how we interact with our finances by giving individuals more control over their financial data – but we have miles to go!
The fundamental premise of Account Holders also being Owners of their Account Data and have control to share with other Service Providers is a powerful notion; however, several factors have to align for this vision to materialise across geography (as it relates to domicile of the Account), local regulations with respect to open banking, standardisation of information interchange (of different financial services), service provider infrastructure and that of the related Banks.
While the EU may have had a head-start with the US recently passing regulations and appointing a nodal body for data interchange standards, Open Banking is a work-in-progress across geographies.
Carlos Kazuo Missao, Head of Innovation Solutions at GFT
One of the main purposes of introducing open banking is to make the financial system more accessible to the masses.
While accessibility may look different from country to country depending on the state of the economy, open banking at its core will enable businesses to break down previous financial barriers.
In more mature economies, this will take shape through new relationships between consumers and their financial data.
Historically, consumers have had minimal control over how they receive and can access their data due to silos within individual financial institutions and between organisations.
Open banking will break down these barriers, opening up data sharing between financial service providers, businesses and consumers. By combining all of this data in one place, consumers will have heightened visibility into their personal financial standing.
For developing markets, on the other hand, open banking will make financial access more attainable. On the consumer side, it will make opening a bank account faster and easier by giving financial institutions the data they need at the push of a button.
Fintechs will also benefit from these enhanced data sharing capabilities, gaining access to secure, permissioned insights from financial institutions that will enable them to bring more inclusive financial offerings to market.
Could open banking be the key to democratising finance in developing nations?
Nicolas de Genot de Nieukerken, Lead Product Manager for Open Banking at SBS
Open banking provides a gateway for financial inclusion by making it easier for financial organisations to develop new products and services that serve the needs of underbanked populations.
For example, one of the primary barriers to credit in developing nations is credit history requirements.
When looking to secure an initial line of credit, most people do not have any credit history and are often denied due because first-time borrowers are seen as a higher risk. This has created a gap in the market for products that service these populations with loans.
And it's not just financial institutions that can expand their loan offerings through open banking.
Open banking also enables banks and financial institutions to engage in data sharing with non-banks, such as stores, which can then extend financing options to their customers as well.
For a small business farmer who needs a small loan on new agricultural equipment for their business, this means that they can go into a store and apply for that loan directly.
On the back end, the store can see the business owner's financial history and cash flow in order to verify their risk profile, even if they have no prior credit history. This enhanced data sharing gives the store more confidence in the consumer's risk profile, while the business owner benefits from a new credit offering.
Carlos Kazuo Missao, Head of Innovation Solutions at GFT
Open banking will be fundamental to driving financial inclusion in developing nations. In the past, credit scores have been a challenge to obtain in developing markets due to lack of credit history—with average or high-ranking credit scores even more uncommon.
This lack of information has made it difficult for banks to determine consumers' risk levels, ultimately preventing these consumers from accessing basic financial offerings.
With open banking, individuals and small businesses who previously struggled with this will have better access to traditional credit offerings, such as mortgages or loans, because banks will gain a more holistic picture of their financial profile.
In breaking down data silos, banks will be able to estimate credit risk more accurately and then offer lower rates and better financial products. For example, in Brazil where open banking is already a mandatory practice for financial institutions, small businesses have seen interest rates drop by 2%.
What is the future interplay between open banking and AI in transforming financial guidance?
Barath Narayanan, Global BFSI and Europe Geo Head, Persistent Systems
Banking data may help inform our thinking on the possibilities at the intersection of OB/AI. The average savings account interest rate vs. the Fed Funds Rate was 0.57 % versus 5.3% - yet only 9% of the depositors shifted balances to higher yields.
Even those who shifted were driven by a flight-to-safety and less by flight-to-yield Mortgage rates dropped during the pandemic (before increasing again in late 2023-2024), yet less than 19% refinanced their mortgages or auto loans.
One interpretation of the above could be that consumers "stick" to status-quo and remain "sticky". All of this is up for potential change – when consumers have access to AI Agents, backed by open banking choices – eliminating the distance and time between best-choice and choice-execution.
This reduction of friction and speed of execution from the combination of OB/AI could redefine the concepts of customer loyalty, relationship management and asset-liability management for banks and other product providers.
Nicolas de Genot de Nieukerken, Lead Product Manager for Open Banking at SBS
The data created through open banking enables financial institutions to create a consolidated financial profile of any business or consumer in a single place.
However, this data is only as good as the insights that banks can derive from it to provide value to their customers. This is where AI comes in, enabling organisations to analyse this data and then leverage the resulting insights to provide new services to consumers.
For instance, if a consumer expresses to their bank that they want to start saving and investing, AI-driven insights can enable the bank to create a personalised budget for that consumer with automated recommendations around how much they should spend and save each month across different categories such as entertainment, food, shopping, rent and more.
Financial institutions can also train these AI systems to make recommendations based on external trends.
Suppose a customer's electric bill trended upward in the winter months over the past three years. In that case, the organisation can plan for these fluctuations, adjusting its budget recommendations to ensure that the consumer is accounting for all factors.
Are traditional banks destined to become utilities in an open banking world?
Nicolas de Genot de Nieukerken, Lead Product Manager for Open Banking at SBS
Traditional banks will always hold the lion's share of consumer trust, and open banking won't change that. It will, however, require banks to make some adaptations in order to remain competitive and cater to their customers' evolving financial needs.
Consumers now know that banks are held to higher regulatory standards than their fintech counterparts, meaning that their money and financial data is secure when held by a bank.
Through open banking, traditional banks will be able to better engage with fintechs, sharing permissioned consumer data with them in a secure way that will in turn enable fintechs to develop more intuitive financial offerings.
These bank/fintech partnerships will be critical to banks' ability to hold onto their customers while continuing to provide them with the services they expect.
Carlos Kazuo Missao, Head of Innovation Solutions at GFT
Traditional banks will never truly disappear. While consumers are beginning to lean more towards the agility and access that new financial technologies provide, there is a deep-rooted trust in banks that will be hard to displace.
This is not to say that traditional banks will not need to adapt in an open banking-centric era, however.
For instance, big banks still have a leg up on digital players when it comes to the amount of data they hold.
But as they are challenged by disruptors, open banking creates an opportunity for these banks to utilise their data more efficiently and partner with digital competitors to offer solutions that would require extensive time and resources to build on their own.
Legacy institutions are also innovating internally to become technology companies themselves. JP Morgan, for instance, has an internal payments technology for creating new payment solutions, instead of relying on third parties.
How will open banking redefine our notion of financial trust and identity?
Barath Narayanan, Global BFSI and Europe Geo Head, Persistent Systems
Open banking has the potential to reshape financial trust and identity. It introduces a new model of trust—one that is decentralised yet robust. Traditionally, trust resided primarily with established institutions.
Open banking shifts this dynamic for empowering customers to gain control over their data, choosing when and with whom to share it. This empowerment fosters trust by making financial relationships more transparent and personalised.
As consumers gain a clearer understanding of how their data is used, they must now place trust in a wider range of third-party providers, which raises concerns about data security and privacy.
Robust security measures, clear consent frameworks and effective regulatory oversight are crucial to maintaining trust in this evolving landscape.
At the heart of this transformation is secure technology, such as tokenisation and biometric authentication, which ensures data integrity while simplifying access.
Nicolas de Genot de Nieukerken, Lead Product Manager for Open Banking at SBS
Open banking shifts data ownership from banks to consumers, putting a new layer of pressure on banks to develop additional security protocols to prevent data breaches, as well as user-friendly dashboards for customers to manage their data sharing permissions.
Customer authentication will be essential in an open banking environment as customers look to share their information with third parties.
Whether the customer is accessing their financial data directly through the bank or via a third party provider, the security protocols should be the same.
For example, if a customer uses biometrics to access their bank account, they should be required to use biometrics to access their financial data via a third party.
Another key factor is trust and transparency, where customers will also become more aware of how and why their data is shared, including consent renewals.
The same way mobile phones ask for consent to share personal photo albums with a third party application and remind the album owner in six months to re-confirm their sharing permissions, banks will take on a similar role when it comes to data sharing.
This will ensure the end customer always has control over who can access their financial data, what data they have access to and for how long.
Might standardised financial data through open banking create new tools for monetary policy?
Barath Narayanan, Global BFSI and Europe Geo Head, Persistent Systems
Standardised financial data facilitated by open banking could address two significant issues in current markets.
Firstly, it can ease monetary policymaking by providing a clearer, more immediate view of economic dynamics.
Secondly, it enables seamless transaction management across businesses and borders. Aggregated, anonymised data can reveal patterns in consumer behaviour, liquidity flows and credit access, enabling more targeted and effective products and policy interventions.
For example, during economic downturns, real-time insights could help central banks design stimulus measures tailored to specific demographics or regions.
Similarly, monitoring systemic risks becomes far more efficient with access to detailed, standardised financial data.
Realising this potential requires close collaboration between regulators, banks and fintech to ensure that privacy is safeguarded while data interoperability is optimised.
If managed effectively, open banking could become a cornerstone of smarter, more agile economic policymaking.
Carlos Kazuo Missao, Head of Innovation Solutions at GFT
Open banking's real-time insights into consumer financial data will give regulators a significant leg up in determining monetary policy.
Currently, most decisions are made based on spread out manual reports of consumer activity. With open banking, regulators will be able to monitor consumer finances and behaviours in real-time, allowing them to quickly and accurately determine when and where policy changes might be necessary.
We're already seeing this in the US, where the Consumer Financial Protection Bureau (CFPB) has passed a new rule defining a technical pattern (FDX) that will make it easier for banks to monitor near real-time financial transactions. It will also allow banks as well as regulators to launch near-real time protective actions or alerts.
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