Is Open Banking the New Revolution for Nonprofits?
In short, yes. The Open Banking initiative is nothing short of the biggest revolution in the banking industry. It sets a new standard for the way banks integrate and communicate with the digital world and other third-party services. It opens the door to so many opportunities for consumers, businesses, and entrepreneurs that currently the biggest issue this new initiative faces is how to manage, structure, and build all the cases for commercialisation.
The new initiative would allow consumers to give other registered financial institutions, applications, and companies external/third-party access to their bank account transaction history, and enable them to process payments on their behalf. This can be used for anything from identity verification and risk assessment, financial management, and spending restrictions to new ways of eCommerce payments.
All Roads Lead to Rome
As the ocean is blue and all ships are sailing towards the new commercial opportunities, I would like to take a different observation deck and look at a sector which is usually not associated with digital innovations, namely the nonprofit sector. Open Banking is open to all, so there should be no reason to think that charities and the philanthropic sector cannot jump on the opportunity to change the above perspective and utilise this new standard to solve global problems and change the world for the better.
A lot of charities and foundations support beneficiaries directly through grant giving and supplying goods and services to them. Online applications which use Open Banking to monitor multiple bank accounts, review transactions, and enable bank-to-bank transfers can be created to make those organisations much more efficient and transparent. Another good use case would be the ability to monitor grant spending or beneficiary spending to go only to the purchase of goods that are approved from the grant giver.
One more great example is the ability to get alerts if one of your beneficiaries spends money on a risk purchase e.g. alcohol, gambling or in a specific area they are not supposed to be in.
Solving for Two Massive Issues
Open Banking might even provide the ability for the third sector to solve its biggest issues: transparency and efficiency. The new standard can provide the ability to review charitable income and spending and give much better control and monitoring for charity trustees and supporters. Innovation in fund and bank account management can prove vital for philanthropic organisations to help optimise their spending and attract even more supporters by being transparent and more efficient in their work.
As with any new frontier, Open Banking offers truly amazing opportunities for work optimisation and changing the world for the better. This, multiplied with the positive force of the charity sector, can be an opportunity to show how innovation can move a whole sector forward. Naturally, technical and commercial challenges lie ahead, but I believe initiatives that make our world more open and inclusive should be celebrated and utilised for good to the fullest.
Iskren Kulev is the Founder and CEO of KindLink.