Yet, consumers have become accustomed to sharing their data and have high expectations for banks and credit unions' digital services. They want simple and integrated interactions and fast transactions with an efficient and polished user experience. Consumers seek personalized banking experiences similar to their everyday nonfinancial digital interactions, such as streaming music and TV, social media, e-commerce or travel apps.
In October, the Consumer Financial Protection Bureau
While there is a lawsuit challenging elements of the CFPB's final open banking rule, and a new administration may work to modify the rule, banks and credit unions should continue to take steps to act on a more open ecosystem. Open banking affords financial institutions of all sizes the opportunity to serve as the consumers' financial hub by consolidating banking and fintech products and transactions. The providers that deliver personalized, aggregated information and services can also help consumers and members lead healthier financial lives.
There are several opportunities that community and regional banks and credit unions can adopt now to ensure they're well prepared to comply and benefit from open banking changes and to stay competitive with their larger peers.
Legacy systems and architecture are becoming obsolete and incompatible with today's digital world — both for the consumer experience and internal connectivity of back-office systems. Banks and credit unions must overcome barriers to growth and innovation while simultaneously adhering to the highest financial and data security standards. For many, this means eliminating siloed, outdated technology and business models and investing in modern, cloud-based technology and open APIs to support ongoing digital transformation and secure data sharing.
Financial institutions also need to leverage AI in conjunction with aggregated consumer data to personalize services, and they must navigate the evolving landscape of consumer preferences and competitive pressures. With banks and credit unions facing increased competition and legacy cross-selling, incorporating third-party products into digital banking and aggregating data from external accounts to provide consumers with complete, personalized financial insights is critical.
Moving away from screen scraping toward cloud- and API-based technologies will enable more streamlined integrations, improve agility and collect and access data from various sources securely. Improved data access and management will also help financial institutions gain real-time insights and understanding of users' unique financial situations and needs so they can better serve and advise them.
Through a partnership with Axway, the bank aims to provide API-based data sharing and develop new products that leverage open banking.
Most smaller banks and credit unions don't have the time or internal resources to implement market-leading technology to stay ahead on their own. Fortunately, they can take advantage of open banking and API-based solutions by embracing partnerships and looking to the broader ecosystem without building large, costly teams.
Increasingly, digital banking providers that serve small and midsize banks and credit unions have adopted APIs to enable secure data sharing and transmission. Understanding and monitoring the market, together with researching and vetting the best fintechs and third-party providers to partner and integrate with, will help smaller providers compete, advance their business strategies and service the specific needs of their constituencies.
By leaning into these partnerships and leveraging APIs, banks and credit unions can deliver best-in-class solutions, reduce development and integration complexities, recognize operational efficiencies and get to market faster. They can do so while ensuring they're meeting security standards and preparing to meet the new open banking regulatory requirements.
Today's consumers want to feel supported and understood by their financial providers. They're also demanding real-time services and are accustomed to personalized human financial services — especially at smaller financial institutions. Providing the same blanket digital banking experience to everyone will no longer be acceptable and risks attrition to fintechs or competing institutions. Banks and credit unions should prioritize personalized digital experiences and on-demand information. This goes beyond standard alerts and outdated personal financial management spend and budgeting tools to aggressively considering unique use cases for diverse lifestyles. Further, allowing users to customize their authenticated digital banking dashboards and experiences supports a wide array of consumer user cases versus one-size-fits-all, and ensures easy access to the tools and features used most.
Proactive or predictive alerts will be essential. Financial institutions can better assist users with insights to identify and prevent negative financial events by detecting upcoming scheduled payments and transfers, alerting consumers to potential cash flow issues and sending bill-due alerts and other reminders.
Furthermore, advances in AI-supported capabilities, such as virtual assistants and specific insights, can facilitate automated and on-demand services and support, and help consumers make informed decisions. As these nascent AI-driven tools are refined, they will help assist consumers with more account-specific questions and transactions — moving the digital banking experience to the next level. Secure and private aggregation of user data to reveal individual financial and spending patterns will enable financial institutions to offer predictive and personalized experiences and guidance.
By empowering consumers to make healthier financial decisions with personalized information and insights, banks and credit unions will build stronger relationships that will engender loyalty. Open banking has the potential to enable smaller institutions to compete more effectively with their larger peers, fostering healthy competition within the industry. The regional and community banks and credit unions that acknowledge this and seize open banking opportunities beyond aggregated consumer data will position themselves to capitalize on the possibilities. Those that develop a strategy to tap into the broader ecosystem, intelligently harness data and strive to become their users' digital financial hub will come out ahead.
