Open Banking
Financial Services
Open Banking
Financial Services
October 12, 2022
8 Min

3 Ways CFOs Can Capitalize on Open Banking


A vital duty of any business’s CFO and treasury department is to safeguard the company’s assets meticulously. Adopting any “open” technology can appear contradictory to that mission. To remain competitive, CFOs need tools that help them make better, faster decisions, improve cash flow management, and innovate to build a more sustainable and future-proof business. 

For CFOs and their teams, capitalizing on Open Banking means unlocking the full potential of what technology can bring to financial services. Using Open Banking, banks can open their application programming interfaces (APIs), allowing third parties to access financial information needed to provide financial transparency. Open Banking can empower CFOs to look into the financial well-being of their organization while simultaneously allowing consumers to take back control of their financial data. 

To take full advantage of what Open Banking offers, CFOs must think beyond just payment initiation or using APIs that allow consumers to pay directly with their bank account. While Open Banking Payments can enhance payments and reduce processing costs by cutting out the middleman, Open Banking’s true value lies in its ability to combine payment services with data. Here are three key ways this can benefit CFOs: 

Improved Data Security, Risk Mitigation, and Fraud Management 

Fraud isn’t new, especially in financial services. But, post-pandemic, we are seeing increased sophistication in fraud attacks. According to a study by PYMNTs, 25% of financial institutions with $500 billion or more in assets believe fraud’s new sophistication is a barrier to data security. Popular fraud attempts include ghost fraud, synthetic identity fraud, and card-not-present fraud. Traditional card processes only increase a business’s susceptibility to fraud. 

Open Banking can reduce the risk of fraud in a couple of ways. First, a simplified UX allows for a safer and faster payment option—no tedious card numbers to include and expose to fraudsters. Second, Open Banking Payments were built with Secure Customer Authentication (SCA) in the flow. Put simply, users are authenticated by two or more elements (often via native security tactics like biometrics) that help to mitigate fraud.  

Additionally, the accessibility of real-time financial data and a source of truth for data makes risk assessments and mitigation simpler. With consumer permission, Open Banking helps risk teams develop a story beyond the hard numbers. 

Today, merchants can examine a consumer’s current account data and, in seconds, make better decisions around acceptance rates. Tomorrow, Open Banking will help merchants in relevant industries quickly build risk profiles with refined, up-to-date, and secure data points. This is a game changer for industries such as lending, insurance, housing, etc., which typically rely on lengthy and expensive risk management processes that can require manual input and unreliable data.

Better Liquidity Management 

Having enough liquidity available to meet the demands and commitments of the business is essential to the health of the organization and the role of the CFO. One of the most important parts of liquidity management is cash flow modeling, which gives CEOs and treasury teams visibility of the company’s liquidity. 

With Open Banking, CFOs and treasury departments can shortcut cash flow modeling by creating an automated, real-time treasury management system via Open Banking Payments. Credit card transactions were built for transactions made in person and can take days to settle, which is not ideal for merchants who rely on short-term liquidity. Open Banking was created for the digital economy, bypassing many intermediaries that make credit card processing long and expensive. 

Open Banking makes cash available sooner by allowing merchants to take advantage of faster payment rails. The Clearing House launched real-time payments in 2017 and currently powers Instant Payouts across the U.S. In 2023 or 2024, The Federal Reserve will launch FedNow, an interbank real-time gross settlement system (RTGS) with immediate access to funds once a payment message is received. FedNow will even include a liquidity-management tool (FedNow LMT) that will allow participants and others to transfer funds to each other instantly. This will allow merchants and banks to better meet the liquidity needs associated with instant payments. 

Faster settlement times and real-time analytics from APIs can be factored into cash-flow models, allowing merchants to build healthier and more reliable forecasting models—something that could be immensely valuable as economic challenges become more apparent in the next couple of years. 

Optimized Loyalty Programs and Enriched Relationships with Consumers 

Open Banking, especially when combined with loyalty programs, gives merchants the unique opportunity to better understand consumer buying behavior and build solutions that are faster, safer, and more convenient. Retail loyalty programs have often been lacking in the past because the experience was full of friction for the end user. 

When users connect their bank via Open Banking, purchases are registered automatically and consumers are rewarded at the point of sale. This is instantaneously valuable to the consumer and the merchant alike. Not only does this enhance the customer experience, it gives consumers a feeling of explicit control of their data that they can use to their advantage. 

By combining rewards with data insights, merchants can access real-time transaction data and aggregated purchasing behavior to understand the consumer’s shopping experience. CFOs and treasury teams can use this data to feel more confident about decisions they make around budgetary allocations for products and discover new growth opportunities.

Preparing for the Future 

For innovative CFOs willing to explore new ways to build value and remain competitive, Open Banking can bring serious advantages. While the prevalence of Open Banking in the U.S. isn’t as substantial as in Europe, it continues to grow exponentially with time and continued adoption. It’s only a matter of time before consumer trust in Open Banking takes off and merchants who already have a strategy in place will stand to gain the most. 

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