Mobile wallet technology opened the door for customers to access accounts and engage with their financial institution with ease. Now that smartphones are taken for granted, so are many of the conveniences that once seemed miraculous. But now isn't the time to stop innovating. As non-financial organizations begin to adapt to their users' behavior they are recognizing the need for flexible payment options, voice-driven transactions and AI-powered purchases. Regulators have taken notice and are now encouraging traditional financial organizations to embrace open banking initiatives. In other words, third-party APIs can reach into customer bank accounts and make payments on behalf of the customer.
Open Banking and Innovation
This month, European and British banks will participate in open banking initiatives as part of the European Commission's Second Payment Services Directive (P2D2). For consumers who prioritize convenience over traditional security and a private payments infrastructure, this directive allows them to enjoy the flexibility of third-party payment systems without ever having to access a mobile bank app. That's a problem for banks because it decreases customer engagement with bank services and because it limits the payment data that, as David Birch writes in Wired, "Banks need ... to develop new value-added services..."
Open banking stands to diminish future innovations and limit consumer services that traditional banks can provide to their clients.
Amazon, Google, Facebook, Alipay, Venmo and others stand to edge out traditional banks but there are strategies and technologies that traditional financial institutions can leverage to stay competitive. To appeal to the demographics most likely to rely on alternative payment systems, banks and other institutions can harness wireless proximity beacon technologies that integrate with existing business application systems. Backed by Secure Access Modules (SAM) beacon technology has the capacity to perform with as much flexibility as alternative payment technologies, but is still a part of a bank's network.
As part of the bank's existing payment infrastructure, wireless proximity beacons securely capture payment data where it can be accessed by authorized parties within the client's bank. The client is able to make payments via their tablet, smartphone, retail mobile payment terminals and even manage peer-to-peer payments. There are also capabilities that allow bank customers to access cryptocurrency wallets.
By keeping pace with customers' technology preferences and offering secure end-to-end services, traditional financial institutions can maintain their century's old advantage.