Extending Open Banking to Foster Financial Inclusion Globally
5 minute read
8 Aug 2023
In today’s increasingly connected world, open banking has emerged as a catalyst for transforming the financial services landscape. Open banking seeks to break down the barriers that banks have customarily erected around their data, which is powering a new era of innovative financial services and a much-improved customer experience. In this blog post, we will look at what open banking means, how it helps consumers, and how Zenus extends this concept to a global scale in support of our mission to create a world of Banking beyond borders.
What is open banking?
First, let’s start by defining open banking. Open banking is the practice of sharing financial data between banks and authorized third-party service providers using standardized application programming interfaces (APIs). That might not seem like a big deal, especially when seen through the sensibilities of 2023, when our lives are heavily intertwined with the digital world.
However, it’s important to consider the importance of open banking within the strict security and regulatory responsibilities that the financial services industry has historically shouldered. Banks are and always will be under strict obligation to guarantee the adequate protection of our personal financial lives and the security of our sensitive information. This has shaped their relationship with customer data, with the result being that banks have traditionally maintained customer data siloed within closed systems, safeguarding it vigilantly.
How did open banking happen?
So, how did open banking come about? Open banking emerged as a result of several factors, such as technological advancements, regulatory initiatives, and changing consumer expectations. The rise of fintech startups and the widespread use of mobile technology challenged traditional banking models, prompting the need for greater transparency, convenience, and personalized financial solutions.
Banks, traditionally tasked with safeguarding customer data, tended to hold onto this data for its commercial value rather than sharing it. Simply put, exclusive access to individuals’ private financial information provided valuable consumer insights that enabled them to offer customized products and services based on their clients’ preferences and needs. This exclusivity hindered innovation and limited consumer choice.
Open banking frameworks
Recognizing the need for change, the European Union introduced the Payment Services Directive (PSD1) in 2007, which laid the foundation for open banking. In 2016, the EU further expanded the concept with PSD2, stimulating competition in the financial services sector and encouraging secure data sharing. But regulatory frameworks and standards have played a crucial role in facilitating open banking on other continents as well.
The United States has also taken steps towards open banking with the Consumer Financial Protection Bureau’s (CFPB) Open Banking Rule, which proposes giving consumers the right to control and share their financial data with banks and non-bank financial institutions through APIs. And, with the benefits becoming increasingly obvious, similar legislation was passed in other jurisdictions such as Australia, Singapore, Brazil, and others.
Zenus Bank’s mission and open banking
Zenus Bank was founded on principles that closely align with the ethos behind open banking. At its core, open banking aims to bring about innovation, enhance the banking experience, prioritize customer centricity, and ultimately provide better services to consumers. These principles resonate deeply with our mission.
The global financial system has historically left many individuals underserved due to the limitations of their local banking systems. But Zenus believes that every person, regardless of their geographical location, should have the opportunity to participate in the global marketplace. That’s why we are working hard to eliminate the barriers imposed by geography and ensure that access to quality banking services is not restricted based on one’s location.
The way we do this is by providing people and businesses in more than 180 countries with access to full US bank accounts. By breaking down the traditional practices that have kept many people away from the worldwide market, we empower customers with increased financial connectivity, cutting-edge security, convenience, and a modern customer experience. As we build on top of the principles of open banking, Zenus Bank is gradually leveling the playing field for individuals in developing countries. The outcome, we believe, will see the unlocking of the dormant economic potential that exists in so many places around the planet.
Open banking has emerged as a transformative force within the financial services industry, tearing down information silos and stimulating innovation. By embracing the ethos of open banking, Zenus Bank is enabling individuals worldwide to access the American banking system, thereby fostering financial inclusion and opening up new possibilities for global economic participation. As Zenus continues to pioneer accessible and borderless banking, we exemplify the potential of modern banking to reshape the global financial landscape and create a more prosperous future for all.