Open Banking: why this risky pursuit is the key to accelerating Fintech innovation
The Fintech landscape in Southeast Asia has grown tremendously over the last 10 years. For one, Open Banking, which was initially perceived as a good-to-have, has now become essential due to many industry factors, such as a booming e-commerce industry and a large growth in cross-border business activities.
Open Banking, in layman terms, is the “opening up” of banks to external vendors and developers. This creates a controlled, and in most cases, regulated access for Third-Party Providers to make use of banking services and customer-permissioned data — services and data which would previously have been siloed behind secured servers and legacy systems.
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What is Open Finance and how can it help Indonesia’s unbanked?
Open Finance democratizes access to financial services, benefitting both consumers and fintech companies in markers such as Indonesia. One hundred and thirty million. That is the number of adults within Indonesia who do not use traditional bank accounts to access financial services such as loans and credit cards. Instead, they utilize fintech services such as digital wallets and peer-to-peer (P2P) lending to fulfil their financial needs.
With over 360 registered fintech companies within Indonesia, the growth of the industry is well documented. However, the financial data of their customers is often stored in silos and not exchanged. This creates a significant problem for both companies and consumers, as the former lack the necessary information to confidently offer loans and other financial products for the latter. As consumers are unable to access the right financial products to help improve their financial wellbeing, a financial divide is created.
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