Internationally, open Banking has been seen as a financial revolution – bringing about ways for consumers to feel more empowered than ever before – enabling them to be vetted and easily gain access to what they need given their lifestyle needs.
Simply stated, Open Banking is about sharing data securely between banks, financial institutions, and third-party providers, allowing consumers to transact in a much easier way; and eliminates the need to manually present documents, reducing time and effort taken for compliance or verification purposes.
The concept of Open Banking is not new. It was first introduced in the UK in 2018 and has been implemented in several countries around the world.
South Africa has been observing these trends to best gauge next steps – learning what happens beyond first implementation. For Shanaaz Trethewey, chief operating officer for Comcorp South Africa, a software innovator and specialist in authentication technology solutions, local trends are picking up and there is a growing comfort around adopting digital consent models and the transmission of data on behalf of consumers.
“As a country, South Africa has laws of a global standard, and our financial institutions have very stringent compliance requirements with our verification processes being of a world class standard. As we embed automated ways to comply with these requirements – we are most enabled to receive authentic supporting documents with permission-based sharing models – mimicking elements of open banking principles. We can see evidence of this around us – whether it’s in the form of permission consumers provide for credit checks or in the form of payment platforms whilst shopping online. As a business – and consumer community – we need to really think broader to extend these emerging trends to maximise how we transact,” she says.
Whilst permission-based data sharing makes it easier for the consumer and the financial institution to complete their assessment or verification processes –open Banking goes one step further and eliminates additional time and effort, by moving the focal point to the individual, and how they own their data. This is done by centralising the exchange to an independent platform where the required information can be securely shared across different industries and third-party service providers upon request.
The main goal of Open Banking is to empower consumers by giving them more control over their financial data and enable them to access a wider range of financial services. It can also help to create a more competitive and transparent financial market, where consumers can easily take advantage of the wealth of products and services that are available.
“We are seeing more businesses, outside of the financial sector, maturing their digital channels to achieve digital verification by receiving supporting documents direct from source,” says Trethewey.
Open Banking has the potential to change the way people manage their money on a very personal level, by allowing consumers to access and share their financial data. Not only can we begin to fully harness the potential of customising products tailored to the needs and preferences of the individual, but we can make every day business seamless.
“Also, with interest rates getting higher, and inflation growing, consumers and lenders find themselves transacting in a strained economy. To navigate this demand for credit, lenders are forced to be more vigilant when performing their risk customer assessments. A better understanding of spending habits and obligatory expenditure is one aspect – however also confirming income becomes of greater importance. The scope of a consumer’s risk assessment is constantly growing – and we either experience it as businesses adding another layer of compliance, or as a customer who asks, ‘Why are we having to produce the document again’.
A consolidated view is the answer and unpacking open banking as an industry is where the answer lies – for business’s group procurement and for how we as people function today in the digital world we live in,” continues Trethewey.
South Africa has enough guidelines already in place, as well as the knowledge and technology for the taking. All that remains is for businesses to come together as a community and embrace Open Banking and its ability to promote transparency, improve frictionless business processes, and provide consumers with more choice. Its continued growth is likely to create even more innovation in the financial sector, ultimately benefiting consumers. Watch this space!