A 2019 Transunion study found 80% of financial firms have either implemented Open Banking or plan to adopt it in the near future.
The Open Banking model promises improved data sharing, enhanced customer experiences, and new revenue streams to support emerging players in the financial services sector.
This new era of banking has the potential to put the power back in the consumer's hands. Continue reading to uncover the powerful relationship between Open Banking and data democratisation.
In 2016, the UK’s Competition and Markets Authority (CMA) published a general review of the banking sector. The report found that established banks faced little competition when attracting and retaining customers while emerging financial institutions found it extremely difficult to penetrate new markets and grow.
With the big players dominating the global financial landscape, the state of banking meant customers were limited by a lack of choice or control over their financial decision-making.
Open Banking was born as a way to transform how customers manage their financial decisions. Regulators aim to re-energise banking in a way that makes it much easier for customers and SMEs to access transaction information, compare account insights and find products suited to their needs.
This data-oriented approach works by allowing users to give consent to regulated Third Party Providers (TPP) to access bank transaction history and make secure digital payments.
One of the key goals of Open Banking is to help customers and businesses move, manage and make the most of their money. Open Banking puts the user in control of who can access their information and how they use it. Additionally, Open Banking customers can withhold data access if and when they choose.
Open Banking Regulation
Open Banking regulation is designed to make online banking as safe and secure as possible for customers.
Every TPP enrolled and registered in European Open Banking is approved by a national regulator that can be found on the PRETA Open Banking Europe directory. Each regulator provides a standardised machine-readable source for all TPPs in Europe.
The goal is to bring financial market players together to turn mandatory regulatory requirements into an operational reality.
Until recently, IT departments within large organisations were the gatekeepers to user data. Marketing departments, business analysts and C-level executives harnessed this data to make better business decisions and find a way to gain an edge over competitors.
Data democratisation restructures this set-up.
Democratisation makes the relevant data accessible to everyone. From developers in emerging FinTechs to auditors in established financial institutions, those who receive access to user data have a responsibility to act in the best interest of the data owner.
What Does Democratising Open Banking Data Mean?
In the accounting and financial services sector, Open Banking is helping to accelerate data democratisation. For example, in Europe, the implementation of PSD2 (the European regulation for electronic payment services) has opened up financial data to FinTech firms and tech developers across a range of industries.
Before Open Banking, banks operated as a closed ecosystem with exclusive ownership of consumer data. Not only were these institutions limiting financial transparency for customers, but they were also making little use of valuable insights to enhance customer experiences.
For banks, this resulted in a stagnant marketplace and a poor environment to innovate and offer customers competitive deals. Traditional data handling procedures meant there was little visibility and no access to products that were best suited to their needs or behaviours.
How to Effectively Democratise Data
While democratisation opens data up for every level of a company to find new and innovative business opportunities, it takes a structured approach to be truly effective. Data democratisation involves:
- Focusing on relevant data
- Using the correct technologies and digital tools
- Implementing governance and compliance measures
- Increasing the data literacy of all employees
- Analysing the data to make smarter decisions
Accountancy & Digital Banking in the Modern Age
The fusion between banking, accountancy, and technology is primed to change the way businesses manage their money in the long-term.
Accounting firms that embrace the move to Open Banking and upskill their people to harness data-driven insights will gain a competitive advantage in an ever-evolving market. The accountancy industry must pull together to champion technological progress and keep pace with the emerging digital landscape.
Stay Ahead of the Curve with INAA
We’re the International Association of Independent Accounting firms, established over 25 years ago to facilitate cross-border business.
Here at INAA, we connect accounting firms who aim to deliver quality professional services around a shared vision to make global business personal and take personal business global. Our collaborative association of international businesses is committed to being a part of the conversations around cutting-edge Open Banking innovations.
Join today to start building powerful business relationships.