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Open Banking has emerged as a global financial revolution, empowering consumers by granting them greater control over their financial data and access to a wider range of financial services.
South Africa, keenly observing international trends, is now poised to adopt this transformative concept, as local businesses and consumers recognise the potential of open banking to streamline transactions and maximise efficiency.
“South Africa has laws of a global standard, and our financial institutions have very stringent compliance requirements with our verification processes being of a world-class standard,” says Shanaaz Trethewey, chief operating officer for Comcorp South Africa, a leading software innovator and specialist in authentication technology solutions.
“As we embed automated ways to comply with these requirements, we are most enabled to receive authentic supporting documents with permission-based sharing models – mimicking elements of open banking principles.
“We can see evidence of this around us, whether it’s in the form of permission consumers provide for credit checks or in the form of payment platforms while shopping online. As a business – and consumer community – we need to really think broader to extend these emerging trends to maximise how we transact.”
Open Banking, which entails secure data sharing between banks, financial institutions, and third-party providers, eliminates the need for manual document presentation, significantly reducing compliance and verification time and effort. The concept was first introduced in the United Kingdom in 2018 and has since been implemented in various countries around the world, inspiring South Africa to explore its own implementation possibilities.
While permission-based data sharing simplifies assessment and verification processes, open banking takes it a step further by placing the focus on individuals and their ownership of data. This is achieved by centralising the exchange of required information on an independent platform, securely shared among different industries and third-party service providers upon request.
The primary goal of open banking is to empower consumers, giving them greater control over their financial data and access to a broader range of financial services. It also aims to foster a more competitive and transparent financial market, where consumers can easily leverage the abundance of available products and services.
“We are seeing more businesses, outside of the financial sector, maturing their digital channels to achieve digital verification by receiving supporting documents direct from the source,” highlights Trethewey.
Open banking has the potential to transform how individuals manage their finances on a personal level, as it enables customised products tailored to their specific needs and preferences, while facilitating seamless everyday transactions.
As interest rates rise and inflation grows, both consumers and lenders find themselves navigating a strained economy. To navigate the demand for credit, lenders are compelled to exercise greater vigilance in their risk assessments.
Understanding spending habits, obligatory expenditures, and confirming income become critical aspects. The scope of a consumer’s risk assessment is continuously expanding, leading businesses to add additional compliance layers and consumers to question the need for repetitive document production.
“The scope of a consumer’s risk assessment is constantly growing – and we either experience it as businesses adding another layer of compliance or as a customer who asks, ‘Why are we having to produce the document again?” continues Trethewey.
“A consolidated view is the answer, and unpacking open banking as an industry is where the answer lies – for business’s group procurement and for how we as people function today in the digital world we live in.”
The answer lies in adopting a consolidated view and embracing open banking as an industry. This approach can revolutionise group procurement for businesses and improve how individuals function in today’s digital world.
South Africa has the necessary guidelines, knowledge, and technology in place; what remains is for businesses to come together as a community and fully embrace open banking, which promotes transparency, enhances frictionless business processes, and provides consumers with more choices.
The country’s robust legal framework, stringent compliance requirements, and advanced technological infrastructure furthermore make it well-suited for open banking adoption. The pieces of the puzzle are already in place, argues Trethewey. What remains is for businesses, financial institutions, and consumers to collaborate and fully embrace open banking.
“South Africa has enough guidelines already in place, as well as the knowledge and technology for the taking. All that remains is for businesses to come together as a community and embrace Open Banking and its ability to promote transparency, improve frictionless business processes, and provide consumers with more choice,” she says.