The banking data-VS-CX conundrum, secure API access and amazing future potential – this is how open banking APIs unlock customer-first solutions for banks and FinTechs
Need to deliver personalised and customer-focused solutions in banking?
It’s a problem, considering that banks normally operate within closed systems, tightly controlling their customer data and limiting access to third-party providers. While this helped ensure security, it’s recently started hurting banks badly.
Established financial players are losing customers to disruptive technologies with some 58% of consumers willing to switch to a different platform with a better experience. In fact, 78% of financial decision-makers have already started experimenting with disruptive brands.
The solution? Open banking. By securely making specific customer data available to FinTechs and third parties, banks can work with innovators to create more powerfully customer-centric banking solutions.
But what is open banking, and how exactly can it help finance brands deliver better customer experiences?
Open banking is a framework that allows banks and other financial institutions to share customer data with third-party providers — like FinTechs or developers — safely, securely and with the customer’s consent.
It works through Application Programming Interfaces (APIs). APIs are digital bridges that enable different software systems to communicate with each other. In open banking, the third party’s system uses an API call to request certain data from the banks’ systems, effectively giving the FinTech or developer access to data that only a bank would normally have.
Previously, this would have been extremely difficult: With the bank’s closed system, any third party seeking legal access would have had to either personally have business ties and permission from the bank – only possibly if they are a recognised partner – or have been granted rights to access by a higher authority (court order).
Of course, there are numerous illegal and unsafe ways of acquiring the same data – and those harmful practices, coupled with the fact that they’re losing customers to sketchy startups, are what spurred banks to consider open banking.
See how to use big data to understand your customers’ needs.
The real benefit of open banking APIs lies in combining the extensive customer data of the bank with the innovation and tech-savviness of a FinTech to move from the standard old “one-size-fits-all” banking products that are failing to excite consumers to advanced new solutions like:
By enabling personalisation, APIs improve customer satisfaction and loyalty while opening new revenue streams for banks.
See how to use customer data analytics for hyper-personalisation and combine it with machine learning for personalisation in finance
Personal finance management (PFM) apps, such as 22seven (now Vault22) or Plum, leverage open banking APIs to provide users with real-time insights into their financial health. By securely accessing and consolidating data from multiple accounts, these tools enable customers to better understand their spending habits, set budgets and make informed financial decisions.
In the lending space, platforms like Upstart are using open banking to go beyond traditional credit scoring models. By analysing customers’ financial data in greater depth — such as income patterns, spending habits, and account balances — these platforms can now offer more equitable and personalised lending terms.
Open banking has also transformed know-your-customer (KYC) processes, which are often a source of frustration for new customers. By automating the secure sharing of verified financial information, banks and third-party providers can significantly reduce onboarding times and eliminate redundant steps.
Another transformative use case is the integration of banking systems with accounting platforms like Xero. Through open banking APIs, businesses can automate expense tracking, streamline payroll processes, and maintain real-time oversight of their financial operations.
Learn how to create campaigns to target your high-value customers and see how to use your data to boost customer loyalty.
While open banking is a powerful innovation enabler, its adoption faces some challenges.
Security and privacy concerns remain paramount, as banks must protect sensitive data to maintain customer trust. The lack of standardised APIs across regions complicates integration, making it harder for third parties to scale solutions globally.
Additionally, some banks resist open banking, viewing FinTechs as competitors rather than collaborators, which limits opportunities for co-innovation and customer-focused solutions.
However, the opportunities far outweigh the challenges:
Discover these 7 powerful ways to boost your customer experience in finance.
The future of open banking lies in its ability to integrate financial services into every facet of daily life. It is ideal for driving more AI-driven solutions, such as hyper-personalised and predictive services, and is definitely a possible enabler for more secure and transparent cross-border banking.
Need to build smarter products that help you achieve your business goals?Let our team of digital consultants help you do it right, save money and get it done faster.
