Open banking is a practice by which two or more financial service providers can access each other’s data on a shared client through application programming interfaces (APIs).
By promoting competition, innovation, and customer-centric services, open banking gives wealth owners greater control over their financial data and choices.
Open banking also brings rewards to financial service providers like family offices, which have many moving parts and diverse requirements of their own. Among the key benefits of open banking for FOs are:
01 Integration of Multi-Source Data
A fragmented, inaccurate financial picture often prevents family offices from providing the expert insights and tailored service that clients expect and deserve. One of FO’s biggest challenges is integrating data from multiple banking sources. If done manually, this process can be tedious, often seems impossible, and requires advisors to spend less time serving clients. Open banking solutions automate this process to provide family officers and their clients with a more holistic view of wealth.
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02 Visibility and Transparency
Open banking provides clients with greater visibility of their finances, enabling them to make more informed decisions in partnership with the FO. Wealth managers can see their clients’ overall financial situation, including where funds are flowing and potential opportunities for savings and portfolio adjustments.
03 Security and Control
Open banking enables greater control over customers’ financial data. With access to it through APIs with cutting-edge security features, FOs can innovate and improve services. Both banks and customers can be confident that they are taking no unnecessary risks, as FOs and their clients jointly determine who may access data on financial flows.
04 Efficiency and Cost Savings
Manually entering data often involves a significant possibility of human error. And even if the data is entered correctly, it may be out of date – especially when markets are volatile. A FO relying on family members to provide end-of-month or end-of-quarter statements, for example, often risks losing sight of current portfolio valuations. By automating tasks such as data entry and reconciliation, open banking solutions help not only improve accuracy but also streamline family officers’ workflows. Additionally, FOs can take advantage of an expanding range of open banking features and functionalities like investment monitoring notifications.
05 Tailored Services and Advanced Decision-Making Capabilities
Fundamentally, open banking supports an open financial ecosystem. Wealth owners can easily access a wide range of service providers. In turn, these service providers can access their clients’ relevant financial information in one place to make better-informed asset allocation decisions with the help of new tools and analytical capabilities for identifying opportunities and trends.
Open banking solutions are a game-changer for many family offices, who can use them to gain a holistic view of their clients’ finances and make more informed decisions accordingly.
