API OPEN BANKING
According
to a report by Allied Market Research, the value of the global Open Banking
market will reach $43.15 billion by 2026, growing at a CAGR of 24.4% from
2018's $7.29 billion. This increase is driven by a number of factors, ranging
from government regulations that provide positive signals and support, to
faster and more diverse adoption of services through Open Banking API.
In
general, the concept of Open Banking allows financial services industry players
(including fintech) to gain access to various customer data from banks and use
it to build alternative financial services. On the other hand, it is also
beneficial for banks to expand the scope of their transaction services across
various digital platforms through integration - with the ultimate goal of
expanding their customer base.
About Open Banking API
The
new chapter of Open Banking began in early 2010, when authorities in the UK and
Europe required banks to open data and services to third parties through a
secure API mechanism. As a result, the financial ecosystem, especially fintech,
gained significant growth momentum as innovators and investors flocked to try
to bring new breakthroughs in digital financial services.
The
regulation then developed in 2018, the European Union enacted the Payments
Services Directive 2 (PSD2) as the foundation of Open Banking. The European
Union's footsteps were then followed by regulators in various countries such as
the United States, Singapore, Australia, Japan, and others. Meanwhile in
Indonesia, the largest private bank, BCA, began releasing Open API in 2016 with
the aim of building a more comprehensive service ecosystem.
Now,
the concept is becoming clearer. Open Banking is a mechanism for providing
secure access to customer data through the use of Application Programming
Interface (API) technology. Customer data also relates to their identity and
transactions. Third parties can access these data through the connection
presented, with the consent of the customer. Meanwhile, Open Banking API is a
mechanism for providing connectivity between financial institutions and third
parties to access customer data.
In
order to secure transaction traffic, regulators also emphasize high security
standards in the API system implemented, both through data security/privacy
certification and good governance.
Benefits of Open Banking API
There are several benefits
that third parties can get from the Open Banking API, including:
1. Encouraging financial service innovation; armed with a variety of customer and transaction data APIs, Open Banking API users can be creative in presenting financial product innovations that are needed by the community. For example, to facilitate the payment process on e-commerce sites, present card payment services in entertainment applications, and so on.
Comprehensive data source; the data obtained from API connectivity is obviously validated and up-to-date. Such data allows innovators to leverage it as big data for various specific purposes - for example, to analyze their customers and spending trends
Compliance
and high standards; financial institutions
such as banks are highly compliant in all aspects, from governance, data
protection, system security, and so on. This will encourage their partners to
follow their standards.
Customer convenience and confidence; basically, using the Open Banking API allows customers with existing accounts to transact in various services without having to create new ones. This variety of payment systems is one of the important aspects that digital service developers need to consider to improve customer retention.
Meanwhile, for Open Banking API service providers such as banks, the benefits will be obtained such as:
New source of revenue; some service providers charge per transaction for each API implementation rolled out. The more platforms adopt, the more transactions occur. This gives the service provider the possibility to earn a lot of revenue from this.
Increase customer base; some digital applications now allow users to do various things related to banking services, ranging from opening accounts, making payments, applying for credit, and so on. This has the potential to lead potential new customers from the user base of the related digital services to also become customers of the Open API provider bank
Completing the product ecosystem; banking services can be embedded in various consumer and business applications. This makes the ecosystem of affiliated products more diverse, bringing added value to customers.
Getting closer to customers; Open Banking API services can pamper customers to optimize their accounts that can be used to transact anywhere
