Trust as the cornerstone: A quick guide to open banking and open finance adoption

Open banking and open finance are reshaping the financial landscape across the world, connecting consumers and businesses to financial tools in new and innovative ways. 

It enables consumers and businesses to securely share their financial data to access innovative financial experiences. For consumers, it can be the difference between completing a loan application in minutes rather than hours, and for businesses, it can drive performance gains and stronger financial outcomes.

• For businesses: Open banking can significantly optimize cash-flow monitoring, enable faster credit assessments, and lower the friction in bank-account integration into accounting and ERP systems, improving efficiency and decision-making.
  
• For consumers: Open banking can enhance personal finance management through budgeting tools, enable faster loan approvals, and support tailored product recommendations, giving consumers greater power and visibility over their financial lives.

From a consumer perspective, open banking and open finance fundamentally shift how consumers and businesses interact with financial services.

In fact, 92% of businesses report that open banking is essential for future-proofing their organization, according to research from Mastercard, Rise of open banking: The trust imperative. 

As the financial services ecosystem, including banks, credit unions, and fintechs, build deeper expertise in serving customers digitally and more intuitively, open banking becomes an essential innovation driver.

Currently, payments serve as one of the propelling engines for open banking adoption, according to Mastercard:

• For businesses: 93% of businesses report that open banking makes financial transactions more efficient and the data emerging from open banking environments can be used to improve financial management, business lending decisions, and accounting.
  
• For consumers: Sending money to others is the most popular open banking use case for customers and 78% say having the ability to pay directly from their bank account is important when choosing where to shop or make payments online.
  

What this means for banks, financial institutions and fintechs: Open banking’s ability to enhance transaction efficiency while generating actionable financial data creates a powerful value proposition for business clients, while consumer preference for direct bank account payments transforms it into a competitive necessity for digital commerce. 

The value open banking delivers to B2B and B2C customers

Open banking adoption is gaining momentum because the technology delivers significant improvements for both B2B and B2C customers. 

• For businesses 64% of businesses report seeing profitability increases due to open banking. For this segment, open banking’s ability to optimize financial management and create cost efficiencies leads to realizing powerful bottom-line impact.

• For consumers: Individual consumers are leaning on open banking to hasten and simplify high-frequency and/or complex financial processes like sending payments or applying for a loan. 

Overall, consumer expectations for the entire payment experience have been raised, and not meeting them can mean losing customers entirely: 71% of consumers report that they will abandon a transaction if it requires them to go to another platform or app to complete the process.

What this means for banks, financial institutions and fintechs: Open banking, as well as open finance, represents a critical opportunity to enhance customer value and competitive differentiation for organizations that are looking to adopt. Those on the fence may risk customer attrition as the standard expectation for customer experience rises across the industry. 

Security and trust make or break open banking adoption 

Open banking relies on end-users consenting to data sharing, and financial institutions and fintechs that want to leverage this technology need to make sure their digital touchpoints, products, and processes engender trust and B2B and B2C customers feel secure. 

Trust-building requires clear signaling on the part of open banking providers, who must assure both B2B and B2C users that their data is secure and handled by a forward-thinking partner. 

“Consumers must consent to unlocking new use cases and enhanced value under open banking. That’s where trust comes in. Building trust through transparency is key to the future growth of the open banking ecosystem,” said Jess Turner, Executive Vice President, Global Global Head of Open Finance & Developer Experience, Mastercard. 

With regulations across the globe bolstering open banking and open finance adoption and sophistication, financial institutions and fintechs must find product opportunities that lower barriers and resource-lift on part of consumers while finding the right levers on trust and security to ensure consumer buy-in. 

To learn more about how trust and security are impacting adoption and how different consumer segments interact with open banking tools, download this guide.