Open banking is a process, where the banks or financial institutions tend to open up data for regulated access and use. There is no need to worry as it is not unsafe as the description does make it a tinge sound. Banks do have the necessary infrastructure in place for sharing of customers data with the third parties when the customer plans to do so.
The last aspect is vital. Open banking or open banking sandbox is not a ploy at the end of banks to be selling customer’s data. Their intention turns out to be just the opposite as the purpose was to improve the financial services for the customers. Once they open up access to data that is kept in the house, new companies. And products can make their way into the market as the data can be use in innovative ways. So where does all of these lead to
- For businesses- the large and smaller ones- an innovation that is made by the financial service provider would be effective and an efficient tool that is part of the business. Yes it would point to a lot of information, freeing up important time reducing the possibility of manual tasks. Eventually it is going to help you save a lot of money.
- For customers- open banking will explore better ways of earning and to spend
- For the financial service provider- at the top tier a financial service provider can innovate better products to the customers.
The benefits of open banking
Personalization , cost reduction, better decision making along with convenience are the major benefits of open banking. These are the vital benefits that open banking brings on to the customers. It is not only for the customers, but even for the business. With your consent when you open the bank data there are a couple of things that may happen
- A new style of opening up financial information of your business emerges. And for your benefit how it can be used by the software companies
- A new form of software products can be create forcing the new entrants to the market. So as to innovate and complete for a share of your business
A lot of credit exists to the competition and openness you will be able to obtain financial products catering to the style of your business. More likely it is going to witness a break down on the costs front.
It is evident that when you are having a lot of access to the financial data. You will witness that the financial products will lead to better decision making. Being an expert you may witness the following features
- An all in one overview- an accumulation of all aggressions, leading to bank accounts and all of them at a single place
- An increase in availability- In case of some good borrowing items are not available. Whereas in case of others it may be flat denied. But with newer form of access to banking data, customers who have box out are bound to found out new access to financial data
- Superior automation- with banking data being open and available in a standard form, experts are of the view point that they would be able to automate some tasks. It is expect to witness an increase in advice.
In addition to all this, it leads to an improvement in an online experience. A business along with their customers will be able to arrive at end to end bank payment which is flexible, faster and replacing card payments.
The working of open banking
In technical terms open banking, does rely on API, an application programming interface. It turns out to be a structured way where one program provides services to another program. API sandbox provides further inputs on how to take the process ahead. It gives an idea on how the third party may access the service from a bank.
The moment APIs is agree by everyone in the banking initiative. It is up to the banks so as to develop them. Once it starts the business tends to access them, and innovative products be built upon them. The customers of the banks as they are the consumers would be using innovative products. Some of the common examples include
- For business quality solutions- with the payment side of an open banking, a business could resort to the use of methods that enhances cash flow, provides an increase in control or visibility and reduces cost
- Quality financial management- when you are accessing the account data, the open banking data may analyse the money that comes and goes out into the account. It is of help to identity the problem areas and the concern aspects
- Borrowing terms become better- if there is a lack of credit history your borrowing terms may not have the desired impact. But with the aid of open banking the historical data can be analyse that will enable you to demonstrate the creditworthiness.
- Account aggregation- you will be able to witness all your accounts at a single place. This is in sharp contrast where you need to log in to multiple browsers, rather than switching multiple apps on the phone.
PSD2 does not work out to be the same as open banking. But both of them have a close relation to each other. PSD2 happens to an EU regulation that tends to increase competition and innovation at the financial workspace. The monopoly banks have to use customer data that allows business to use the data as the permission of the customer is obtain.
Open banking would be a secure way for the providers to financial information as part of the UK. It would be a result with PSD2 but it is not the same thing. Open banking is going to initiate online process of payment. It would allow customers to directly payments from the bank account that is going to directly authenticate the transaction. Getting start would be dependent upon a third party.
