In a digital-first society where customer needs and preferences are changing fast, financial institutions must keep up. And in the era of Open Finance, the concepts of inclusivity and innovation are becoming increasingly intertwined, reminding industry leaders that as innovation increases, inclusivity must be considered.
Local banks and credit unions, often seen as community bedrocks, are well-positioned to meet the Open Finance moment, and can be at the forefront to leverage inclusive innovation to democratize payments. They have the infrastructure, customer base and regulatory experience necessary to drive significant changes in the way payments are processed and managed. With the right tech stack weaved into this existing framework, these financial institutions can become champions of inclusion and embrace collaboration, all with an eye on business resilience and regulations.
Championing inclusion
Financial inclusion is significantly hindered since many financial services are not always accessible to underserved communities or small businesses. One of the most effective ways to democratize payments is through implementing cloud-native, digital payment platforms, which can enable a wide range of services including instant payments. These solutions are designed to be user-friendly, open and accessible to individuals with varying abilities, offering banks and credit unions a chance to appeal to broader market segments.
Payments cannot be truly democratized without recognizing that community banks and credit unions need access to the same payment processing technologies and partner ecosystem of value-added-services used by global banks. Since these institutions often simply do not have the capacity or budget to build these systems in-house, they need a solution offered at a reasonable price point offering simple integration into their core systems. By leveraging agile, open SaaS systems, smaller financial institutions can reduce costs often associated with new technology, enabling them to pass along these savings and give their customers and members access to a wider range of services. These SaaS solutions are also more efficient, eliminating the high cost of traditional intermediaries.
It is also important to remember that education is a crucial component of financial inclusion. Behind every innovative payment solution should be a team of trusted bankers ready to invest in financial literacy programs designed to guide individuals and business owners how to use this new technology, manage their finances and understand the benefits of various financial products. These programs can be tailored to different demographics, ensuring that more people have the knowledge they need to participate fully in the financial system.
Embracing collaboration
Collaborating with fintech companies that offer surround capabilities, such as low-value cross-border payment rails, through an open, API-enabled payments hub can help community banks and credit unions leverage cutting-edge technologies to enhance their payment systems. Fintech firms often have the agility and innovation needed to develop new solutions quickly, while banks and credit unions provide the stability and trust that customers rely on. Together, they can create inclusive payment solutions that are both innovative and reliable.
By leveraging the APIs of open platforms, community-based financial institutions can easily integrate with these alterative industry players, enabling new, faster and more affordable solutions for their customers and members.
Boosting regulatory and security readiness
Complying with countless financial regulations can often be a barrier to providing inclusive payments services. Just like how open, agile systems help champion inclusion, they can also include regulatory compliance features, which reduce the burden on team members and enable them to focus on service delivery.
Beyond regulatory requirements, financial institutions should be prepared to increase security as they work to be more inclusive. Tools fintech partners that offer enhanced fraud detection and anti-money laundering capabilities ensure that expanding access to the payments space does not compromise security.
Inclusive innovation in Open Finance is not just a trend; it is a necessary approach to ensure technological advancements in the financial sector are shared by many. Banks and credit unions have a unique opportunity to lead this charge by developing and implementing payment solutions that are accessible, affordable and beneficial to more people and businesses than ever before. By doing so, they can help create a more equitable financial system and contribute to the overall well-being of society.
