FREEPIK

By Baasandorj Davaasuren

OPEN BANKING, in the simplest terms, is about giving you more control over your money. Instead of being tied solely to your traditional bank, it lets you share your financial information with other trusted companies. This opens a world of possibilities, from budgeting apps to loan comparison websites.

Some of the key benefits of open banking include easier transactions and greater control. Complex transactions become a breeze with open banking. You can seamlessly switch between different financial services or providers, making online shopping and payments more efficient and secure. Imagine managing all your finances from one place. Open banking empowers you to do just that — you’ll have better control over your budget, reduce unnecessary costs, and enjoy greater transparency in your financial transactions.

While open banking has the potential to greatly enhance financial inclusion in Southeast Asia, especially with the region’s rapid digital adoption, it faces unique challenges shaped by regional and cultural differences. For example, many people in Southeast Asia are still underbanked or unbanked, lacking access to traditional banking services or digital tools needed for open banking. Bridging this gap requires a concerted effort to improve financial literacy, develop the necessary infrastructure, and implement accessible digital solutions.

Additionally, many traditional banks in the region still operate on outdated systems that aren’t compatible with modern open application programming interfaces (APIs), making it harder to integrate third-party services. Each country has its own regulatory framework, which affects compliance and creates a complex web of local laws that firms must navigate. There are also significant concerns among consumers and regulators about the security of sharing sensitive financial data through open APIs. Overcoming these challenges will require a mix of innovative strategies, including developing localized regulatory frameworks, fostering strategic partnerships, and investing in education campaigns to build consumer trust and awareness.

Changing consumer demands have been a major catalyst for the development of safer and faster financial technology (fintech) solutions. With more people becoming digitally savvy and smartphone use soaring, there has been a sharp rise in demand for digital financial services. Consumers now expect these services to be quick, secure, and tailored to their individual needs. This has pushed fintech companies to continuously innovate and enhance their offerings.

The COVID-19 pandemic also played a crucial role by accelerating the shift towards contactless payments and remote banking services. As a result, banks and fintech firms have had to prioritize safer, faster solutions like instant payments, biometric authentication, and digital wallets. Additionally, as more people seek financial inclusion, especially in underserved regions, fintech companies are focusing on creating simpler, more accessible products to bring unbanked and underbanked populations into the financial ecosystem.

Looking ahead, several exciting trends are shaping the future of finance and fintech. Embedded finance is set to grow, where businesses outside of traditional banking offer financial services directly within their platforms, providing more seamless and integrated experiences for consumers.

Decentralized finance or DeFi is also expanding, using blockchain technology to offer more transparent financial services without intermediaries, reducing costs and increasing accessibility. Advances in artificial intelligence and machine learning are improving customer service through smart chatbots, enhancing fraud detection, and delivering more personalized financial advice.

Security is another key focus area, with biometric authentication becoming more common to provide a safer and smoother experience. Meanwhile, there is a growing shift towards sustainable finance, with more emphasis on green and socially responsible products. Lastly, as cyber threats evolve, fintech companies are investing heavily in digital identity verification to protect both consumers and businesses from fraud.

Open banking empowers people with better financial management tools, personalized services, and a more seamless banking experience, resulting in increased trust and reduced friction that benefits both banks and customers.

Baasandorj Davaasuren is the chief business development officer at AND Global.