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The Impact of Open Banking 2024

The Impact of Open Banking 2024
rohit
Rohit26 December 2023

The traditional banking experience was a revolution upon discovery. However, the integration of technology in banking has resulted in the need to continuously innovate to make the entire transacting experience easier. 

Imagine a financial world where you have the power to mix and match services from various providers, creating a truly personalised banking experience. Enter open banking – the current revolution in the financial industry where the talks around the utilities, possibilities, and risks associated with open banking are reaching a fever pitch.

The Rising Tide of Open Banking

Open banking attempts to break the monolithic structures of conventional banks and institutions and bring a ‘mix-and-match’ of services from multiple financial providers catered to the consumers. It is a system where customers can securely share their financial data with authorised third-party service providers through APIs to allow greater collaboration and foster the development of innovative, tailored financial solutions. 

Open banking shifts the focus of financial services from a single-bank model to a collaborative approach. It helps securely and effectively leverage consumer data to foster an ecosystem based on data portability and interoperability. 

This article aims to address some of these opportunities in the context of cross-border payments and international banking.  

Open Banking and Global Payments: Bridging Distances

Open Banking and Global Payments: Bridging Distances

When expanding globally, businesses face major constraints while navigating payment cultures in different countries. For instance, corporate credit cards are most prevalent in the US, but most of Europe relies on wire transfers. 

Payments through ACH (Automatic Clearing Houses) can take days to get authorised. The constant back-and-forth between multiple banks and clearing houses painfully limits and slows the process. There are also specific regulatory abidance for each country that businesses need to adhere to.  

Open banking makes it possible for fintech services to serve customers at their homestead. It addresses the fundamental problems in traditional payment mechanisms and eases bank-to-bank payments. It automates manual processes to help customers authorise payments in a few clicks. 

Open banking further cuts the fluff involved in international banking transactions to help businesses attain global growth. 

For instance, assessment, interchange, and processing fees cost 1.5% to 3.5% of every credit card transaction to merchants in 2020. Open banking cuts out the intermediaries and directly connects customer’s bank accounts. This arrangement saves considerable time and costs for businesses with slimmer margins. 

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