New Era of Finance: The Impact of AI on Open Banking

Santosh Kumar Nayak

Abstract: The advent of Artificial Intelligence (AI) has catalyzed a significant transformation in Open Banking paradigms. Traditional Open banking theories, although foundational, must evolve to address the challenges and opportunities presented by AI integration. This paper critically examines how open banking roles and competencies are reshaped by AI, emphasizing four key dimensions: ethical banking, adaptive agility, human-AI collaboration, and data-driven decision-making. Ethical open banking underscores the imperative for fairness, transparency, and accountability amidst algorithmic decision-making. Adaptive agility highlights the necessity for bankers to foster continuous learning and organizational flexibility, exemplified by successful digital transformations. The exploration of human-AI collaboration discusses managing hybrid teams, redefining roles, and building trust between human and artificial team members. Additionally, the integration of AI into decision-making processes accentuates the importance of balancing data-driven insights with strategic vision and human judgment. The paper concludes with actionable recommendations for practitioners, educators, and developers and identifies areas for future research, thereby guiding leaders to harness AI responsibly and innovatively for organizational and societal benefit. Increased Competition and Innovation: Open banking breaks down data silos, allowing fintechs and smaller institutions to compete with traditional banks by offering specialized services like budgeting apps, instant lending, and automated accounting.Enhanced Customer Experience and Control: Consumers benefit from a holistic view of all their financial accounts in one place, personalized financial advice, faster loan approvals, and seamless, secure payment options like account-to-account (A2A) transfers.Expansion into Open Finance: The trend is evolving beyond just banking data to include pensions, insurance, and investments, creating more comprehensive financial management tools.Focus on Security and Trust: While data sharing increases the potential attack surface, the shift from less secure "screen scraping" to standardized APIs with strong authentication protocols (like multi-factor authentication) aims to enhance security. Building and maintaining consumer trust in data privacy is crucial for continued adoption.Operational Efficiency: For businesses, open banking allows for streamlined processes like automated invoice reconciliation, enhanced risk management through real-time data access, and the potential for new revenue streams through data monetization and partnerships.Regulatory Evolution: The push for standardized rules, such as the CFPB's rule on Personal Financial Data Rights in the US, aims to provide clear guidelines for data sharing, ensuring consumer protection and a level playing field for all participants.

Keywords: AI-Driven Open Banking; Ethical Artificial Intelligence; Adaptive Approach on ML Model; Human-AI Collaboration; Data-Driven Decision-Making; Digital Transformation Strategy

How to Cite?: Santosh Kumar Nayak, "New Era of Finance: The Impact of AI on Open Banking", Volume 15 Issue 1, January 2026, International Journal of Science and Research (IJSR), Pages: 1631-1636, https://www.ijsr.net/getabstract.php?paperid=SR26127072822, DOI: https://dx.doi.org/10.21275/SR26127072822