Experts have said that just the same way standardization of Automated Teller Machines in Nigeria changed the face of banking, so also will open banking. Before the advent of easy access to cash and the proliferation of ATMs, a few banks, such as First Bank, UBA and Société General (Now Heritage Bank) tried but unsuccessfully to create their independent ATM services but that served only their banks.
The efforts failed woefully but not after millions of dollars have gone down the drain. It was after banks came together to form Interswitch, pushing aside their differences, that the ATM scheme was able to take off in Nigeria. The reasons for the success was not farfetched: an open standard for the ATMs and cards and a network effect. Similar efforts between banks have achieved the same benefits – POS, interbank transfer.
The transformation that Open Banking would bring to the financial industry would be more impactful than the ATM and interbank transfer as it frees banks and Fintechs to expand their sphere of innovation tremendously, say analysts. For customers, Open Banking has been created to offer choice and greater control across all their bank accounts.
Customers will be able to share access to their accounts to financial applications and services. They would be able to benefit from services provided by these third parties, such as stock trading, personal financial management, among others. Customers can also make a payment directly from their accounts online without needing to use cards.
Customers who want to share information or make payments this way will need to give their explicit consent to the third parties whose services they want to use. They will also need to authorize this with their Bank using their online security credentials.
Banks would benefit from Open Banking as it allows them to earn even much more from expanded transaction types. Today, banks are limited to the traditional payment methods and have no ideas of what their customers do once they take cash from the ATMs. Open Banking would allow them to have deeper insights into where and how customers spend money which should engender tailored offering to these customers. Fintechs would also finally have a level playing field to compete with larger rivals as Open Banking APIs make it possible for them to develop innovative products, target
niche or wide segments of the market and go into partnership with other financial institutions.
Open Banking Nigeria has been drumming support for Open Banking within the Nigeria financial space, touting its benefits and ability to expand the markets significantly. Additionally, to ease the burden of adoption by banks, Open Banking Nigeria has developed an open, non-partisan and free standard APIs for everyone to adopt.
It has also provided a free sandbox for Fintechs to develop and certify against. Open Banking Nigeria was formed by a group of banking and fintech industry veterans committed to the expansion of innovation within the Nigerian financial space.