Open banking will push banking institutions to increase cloud and application security
The following 2022 open banking predictions by Prakash Sinha, Radware’s technology evangelist and senior director of corporate marketing, were originally published on VMblog.com, December 22, 2021.
In 2022, open banking will continue to gain market traction and acceptance in the U.S. as traditional banks and financial institutions compete on customer satisfaction and digital relevance.
Unlike traditional banking where all customer data is controlled by the parent bank, in open banking, customer data is securely exposed to third-party providers via application programming interfaces (APIs) when consent is provided by the customer. The sharing of that data promises to deliver innovative new services and spur competition. However, it also creates a broader threat surface that must be protected against cyber abuse and malice.
Mobile banking coupled with a savvy generation of consumers who use fintech applications, like Venmo and Zelle, will drive the growth of open banking products.
These apps, which are built on open banking APIs, will trigger traditional financial institutions to streamline their processes to support digital onboarding and offer innovative mobile financial services.
The benefits of open banking for consumers are clear. It empowers consumers to take control of their finances, making it easier to shop around for competitive financial products and services. Rather than contacting each lender individually for information, consumers can give a fintech lending application temporary permission to audit their financial history and risk profile. In return they get faster, personalized, and competitive quotes from lenders – and simply, a much easier way to compare product offerings and make more-informed decisions.
Mergers and acquisitions will become even more common.
Traditional financial institutions will realize increasing competition from neo banks and nimble fintechs. Acquisitions will become an even more important strategy for innovating and staying relevant.
Open banking will drive new revenue streams for fintechs and traditional financial institutions that engage.
Many traditional institutions will be forced to re-think their existing product portfolio and align with the highly competitive open market. Currently, the cost of credit or debit transactions and mortgages are determined by a small group of large traditional vendors. New entrants and payment platforms are emerging in financial services to disintermediate the existing cost profile by using open banking APIs.
Open banking regulations will push banks and financial institutions to open customer data to fintechs through APIs and increase investments in cloud and application security.
Open banking regulations require that banks make valuable data available via APIs. To secure and scale the APIs to handle more users and transactions as well as provide access to third parties, traditional financial institutions will invest in cloud deployments, application and infrastructure security, and scalability.