Unlocking Open Banking: New Opportunities for Growth
TL;DR
Stay adaptable to regulatory changes to tap into emerging opportunities: To harness emerging opportunities and changes with an open mind and be ready to adapt.
Explore innovative data combinations to deliver enhanced value: Consider how combining various types of data can produce useful insights and offer more value for customers.
Use open banking to better understand your customers: Leverage Open Banking insights to understand better and serve customers with personalized solutions.
Did you know that by 2027, Open Banking could generate over $400 billion in revenue opportunities? Yet, many companies still see it as just a tool for credit risk. In reality, Open Banking is transforming industries far beyond lending. If you are asking yourself if open banking is good for your business or how open banking could help your business this article is for you.
Rethinking Open Banking Beyond Credit Risk
Open Banking has long been viewed as a tool for credit risk management, a data source that enables banks and lenders to make more accurate credit decisions. As a result, many businesses outside of lending have dismissed it as irrelevant.
But that’s changing.
Open Banking innovations are evolving rapidly, and companies that previously overlooked its potential should take another look. Businesses that embrace regulatory shifts and explore new data-driven strategies will gain a competitive edge in an increasingly digital economy.
Let’s explore how Open Banking is driving new business opportunities beyond credit risk.
How Open Banking is Paving the Way for New Business Opportunities
Regulations have often been seen as hurdles to innovation, but today, they catalyze change in financial services.
In June 2023, the European Commission introduced two major legislative proposals as part of its Financial data access and payments package, aimed at enhancing competition, security, and trust in the financial sector:
1. PSD3 & PSR: A More Competitive Payments Landscape
The Payment Services Directive 3 (PSD3) and Payment Services Regulation (PSR) introduce stricter API performance requirements for banks (ASPSPs) to improve Open Banking services. Key changes include:
Better access for non-bank PSPs: Fairer competition for non-bank Payment Service Providers (PSPs) by improving access to payment systems and bank accounts.
Stronger security measures: Expanding Strong Customer Authentication (SCA) so multi-factor authentication alternatives that do not rely solely on smartphones.
With enhanced functionality, improved user protection, and expanded access for non-bank PSPs, these proposals lay the foundation for a more innovative, competitive and secure open banking landscape.
2. FIDA: Expanding Open Finance Beyond Payments
The Financial Data Access (FIDA) framework for open finance expands the scope of PSD2 to a broader set of financial data beyond payment accounts. The proposal includes:
Mortgages
Savings products
Investment portfolios
Insurance products
This broader scope establishes clear rights and obligations for customer data sharing beyond payment accounts, stimulating innovation in financial products and services and driving greater competition within the sector.
How to Capitalize on New Opportunities in Open Banking
With expanded data access, businesses can unlock new revenue streams and customer insights. For instance providers, insurance data could be analyzed to identify gaps in coverage, creating new opportunities for product development, upselling, and personalized offerings.
Similarly, just as we saw with PSD2—initially adopted mainly for credit risk assessments—new and unexpected use cases continue to emerge. A prime example is the integration of transactional data into loyalty programs. Last year, SAS EuroBonus launched a credit card matching tool that leverages Open Banking data to help consumers answer the question: which credit card is best for me? Instead of generic recommendations, the tool analyzes users' spending habits and travel behaviour to recommend the most rewarding credit card. This hyper-personalized approach improves customer experience and drives engagement.
With upcoming regulations opportunities for open banking still exist even in credit assessment. Lenders could integrate investment and pension data into their risk models, allowing them to assess a borrower's overall financial health more comprehensively. By considering these assets as alternative forms of collateral, lenders could expand lending options, particularly for individuals or businesses with strong financial portfolios but limited traditional credit history. This shift could lead to more inclusive and tailored lending solutions, benefiting both consumers and financial institutions.
The details of upcoming regulatory proposals are still being defined, but they signal a clear shift in the financial industry toward broader data access and increased competition. Instead of waiting to see how competitors use these new data sources, forward-thinking businesses should explore their potential now. Treating regulatory changes as opportunities rather than obstacles enables businesses to enhance their offerings and develop new value.
Innovation Through Data Combination
Some of the most impactful innovations don’t come from entirely new technology but from combining existing solutions in new ways. Take the Apple Watch. Smartphones and watches already existed, but merging the two created a game-changing product.
The same principle applies to Open Banking. Different financial data points can be merged to create unique insights and solutions:
Banking + Accounting Data: Tools that match bank transactions with invoices to automate reconciliation and detect discrepancies.
Open Banking Data + Loyalty Programs: Reward programs that personalize incentives based on real spending behaviour.
Investment Data + Credit Risk: Allowing lenders to assess financial strength beyond traditional credit scores.
With FIDA and Open Finance on the horizon, even more data points will become available. Expanding data accessibility means businesses have even more opportunities to innovate.
In a world where so much has already been invented so many of the most successful innovations are a combination of existing products or types of data. Who will build the next game-changing solution? The companies that embrace data collaboration through strategic partnerships today.
A Customer-Centric Approach: The Key to Success
Companies that put customer needs first will thrive in the Open Banking era. By understanding and proactively responding to their customers, businesses can build trust, drive engagement, and create products that truly add value. Ultimately strengthening their market position.
Consider SME lending. Small and medium-sized enterprises (SMEs) often struggle to secure financing on favourable terms because traditional credit models don’t account for real-time cash flow. Open Banking changes that. By sharing up-to-date business account data, SMEs can access more tailored, flexible loan options. SME banks and lenders can build a more accurate, up-to-date picture of their financial health opening up fairer credit opportunities for SMEs.
This is already happening with companies like Froda and Qred, which leverage Open Banking to offer fairer lending solutions for SMEs.
Beyond lending, Open Banking powers hyper-personalized financial products based on behavioural and transactional insights:
Loyalty programs that reward customers based on actual spending habits (e.g., SAS EuroBonus).
Smart budgeting tools that provide real-time savings recommendations.
Investment insights tailored to users' financial goals.
In short: The future of finance is personalized, and Open Banking is making it possible.
Final Thoughts: How to Leverage Open Banking for Your Business
The evolution from Open Banking to Open Finance is not just a regulatory shift. It’s a fundamental transformation of how businesses use financial data. With more data sources available and a growing emphasis on competition and innovation, businesses have an unprecedented opportunity to rethink their approach.
Success in this new landscape will depend on two key factors. Winning businesses will:
Embrace regulatory change as an opportunity: those that proactively explore how new data access models will gain a competitive advantage.
Leverage new data combinations: using Open Banking insights to create innovative products.
Prioritise customer needs: designing products that are personalised and value-driven through the combination of different financial data sources to create insights.
At Enable Banking, we empower companies to unlock the full potential of Open Banking. Whether you're improving credit risk models, creating smarter loyalty programs, or building new financial products, we help you turn Open Banking into a strategic advantage.
Want to explore how Open Banking can transform your business?