Reform and Regulatory Challenge of Open Banking to Traditional Financial Industry - Part 3

Secondly, open banking has changed the business model of traditional banks. The operation mode of traditional banks is centered on the development of products and services to improve the efficiency and scale of products and services to win the market and profits. The core part of this business model has remained unchanged for decades. There are problems such as high operating costs, lack of financial functions, low efficiency, lack of innovation motivation and ability, and homogeneity of financial services. This is not only a huge waste of resources, but also the biggest obstacle to financial inclusion.

Open banking should change the rules of the traditional banking game, take the customer as the center, integrate resources with the latest technology and encourage financial innovation. Thus third-party providers can provide customers with better, more convenient, more cost-effective, more transparent and more inclusive financial services, and continuously improve customer experience. Finally, it can achieve automation, action, intelligence and innovation of financial services, popularization, democratization, universal benefits and high efficiency. It can be seen that the operation mode of open banks will have a subversive impact on the operation mode of traditional banks.

Finally, as the traditional financial industry is basically overturned, it will not only change the organizational structure of the financial industry, but also change the way the financial industry is regulated. Under the condition of open banking, the functions and institutions of traditional finance are subverted, so the traditional functional supervision, institutional supervision, active supervision, passive supervision and so on basically do not exist. The new regulatory model emphasizes the protection of consumers’ rights and interests (before, during and after the event), the licensing review of Fin-tech companies and platforms, the setting of API technical standards and the review of pre-established interest relationships, etc. The regulatory approach is completely different from the previous one.