The pandemic is a turning point for us to go digital. With its wide range of benefits to the WFH customers, most companies, especially those who belong to the banking industry, are working on ways on how to make their lives easier and more convenient. In the 14th edition of the Union Bank of the Philippines’ virtual roundtable series E-Talk Tales, which took place last June 28, 2022 via Zoom, open banking and open finance were discussed. The keynote speaker was Ms. Erika Dizon, Chief Financial Officer of UnionBank’s Fintech Business Group. In
So, through the online platforms, it became possible for customers to do everything online–from selling, shopping, doing virtual meetings and classes, and even doing financial transactions. Those activities became possible because of open banking and open finance.
Understanding Open Banking and Open Finance
Open banking and open finance are two models that are now slowly taking over the financial sector, with the promise of revolutionizing banking and financial services like never before and acting as a “catalyst for the new wave of financial innovation.” In her presentation, Ms. Dizon explained that although the goal of the two is the same, which is the creation of an open ecosystem, there is a slight difference.
What is Open Banking?
In the past, a financial institution had difficulty accessing the financial data of another institution’s customers, but in the Open Banking environment, the customer decides if they want to share their data.
Open banking is a banking practice that provides third-party financial service providers to have open access to consumer banking transaction, and other financial data from bank and non-financial institutions through the use of APIs (application programming interfaces. This allows you to open a UnionBank account in various platforms without going directly to the site or application. Another example would be opening another bank account or a credit card application via Gcash.
The Benefits of Open Banking
- It promotes data sharing on banking services.
If you have already given consent to a trusted financial institution to share your data with other financial institutions, it will be easier for them to get the information and process the transactions.
- It can help lenders get a more accurate picture of a consumer’s financial situation. They can check people’s transactions or activities.
Because of open banking, other financial institutions have access to your credit score, so they can easily decide if they will approve or decline your application.
- It helps businesses save time through online accounting and help fraud detection.
What is Open Finance?
Open Finance is the next step after Open Banking. It promotes data and capability sharing across the financial sector. This means that people can have a safe channel to easily share their banking information with other companies.
The Impact of Open Finance Movement
- For financial service providers, it can inspire innovation and create new revenue streams.
- For businesses, it can promote increased transparency and have an efficient and seamless business process.
- For customers, it can help enable personalized and tailored services and meaningful experiences.
Several pillars supporting Open Banking
“All of these factors are coming into play and have triggered the open banking and open finance movement and the beginning of the unbundling of the traditional banking models,” Dizon said.
- regulatory push for frameworks built on principles of consent, interoperability, and collaboration;
- heightened expectations coming from the digital and modern social experiences that are redefining banking and finance;
- competition especially with the emergence of non-traditional players;
- infrastracture, which is increasingly becoming more reliant on application programming interfaces.
The Challenge for Consumers
Though online banking has many advantages, others still have the fear of trusting applications. Others still opt to physically deposit the money at the bank and use a passbook. They do this because they can track their deposit and withdrawal records without taking the risk of losing their hard-earned money with just one click. The fact is, hackers and fraudsters are everywhere and whether you are having the transaction online, at the ATM machine, or inside the bank, there is an opportunity for them to steal your money. Ultimately, it depends on the customer’s preference and the challenge for us consumers to be vigilant.
Highlights of the Q & A
After the presentation about Open Banking and Open Finance, Ms. Erika Dizon participated in a fireside chat with the event’s moderator, veteran journalist Rico Hizon.
- Data privacy
The core of open banking is that there should be customer consent, where end users can have the choice to share their data or not, and limit how much of their data is used. Most apps have the option for the customers to link their bank account like in e-wallets and other business apps/sites.
- Balancing competition with collaboration
Rather than competing, the focus is more about “coopetition”, adding that there is a place for different industry players to benefit from a win-win model. “We understand that some financial institutions, some fintechs, some third parties have specific products and services that we don’t, and we believe that for us to be able to better serve our customers, we should be able to integrate those specific products and services into our own,” Dizon said.
- How banking and open finance can create more value for UnionBank
These allow the bank to identify new potential business models, and with these, generate more income streams and revenue models.
- What can customers expect from the new administration?
UnionBank will be under a new management, but they still have the same goal of giving a better service to the customers. Hopefully, from 1 million depositors, they will be able to double it by the end of the year. They will be having a digital launch in July and with this, we can expect to have a better customer experience. This means the customer personalization will be enhanced, so there’s no need to wait for an eternity to speak with an agent to inquire about your account information.
With Open banking, UnionBank was able to reach more customers. Even in far-flung areas where the bank is not accessible, many customers can get their money through its partners like M Lhuilluer, Cebuana Lhuillier, and LBC.
The E-talk tales ended with this message, “Of course, as a bank, there is a bottom line that we need to think, but we believe that there is a space for both to coexist, for the customers to be served appropriately and for the bank to be able to have new business models.” With that, UnionBank customers can be assured that Open Banking will drive the digital economy.