What is Open Banking? Open Banking is a practice that allows sharing of customer’s financial accounts safely via electronic medium. The data is taken from banks and financial institutions via the Application Programming Interface. Let us analyze it with the help of an example.
Assume you have only two friends with whom you share your thoughts, experiences, and issues. They assist you in resolving your problems with their experiences. Now, if you have a network of close friends, do you think sharing issues with them and getting their experiences can give you a broader perspective?
Open Banking lets you rely on networks to assist you with your finances. The third party share your financial details with many platforms and financial institutions and manages your money better than centralized banks. In addition, it makes the customers more empowered with data sharing and awareness of their financial position through innovative solutions.
Earlier, traditional banks were the sole owners of customer data and had limited in-house growth options. Today, with the help of Open APIs (Application Programming Interfaces), about 80% of institutions have embraced partnerships with Fin techs to garner better earnings and ensure transparency of the channel delivering superior customer experiences.
As mentioned above, Open Banking enables APIs to get the work done. APIs apps or programs are mediums for two or more applications to interact. They are first agreed upon by the government, regulators, and then banks. Banks then build and implement them via developers. Businesses and markets can now access them and showcase their innovative products and services to the customer base. APIs give direct access to your account balance, transactions, investment options, etc.
The apps used earlier required you to sign in to your bank accounts with the bank username and password, which posed significant risks to your financial privacy. But with APIs, you do not need to give bank-enabled account details and yet be open to new markets for better services.
In short, Open Banking resorts to serving customers the best options, increases interoperability, earns profitability and efficiency.
With the modern implications of networking over several platforms, more significant risks are sure to follow.
Some of the providers who have implemented Open Banking strategies in the US are:
It is still at an early stage of development in the US but with the progress in technology. The country is sure to witness the evolution of financial management, customer satisfaction, and overall growth.
We will look into some of the banking concepts and analyze the importance of Open Banking strategies.
Individuals create many accounts for several purposes like a savings account, home loan account, study loan account, etc. APIs built on those bank accounts can keep track of the funds and, with the owner’s permission, can enable the growth of the funds by channeling it to relevant sources.
Open Banking can help banks devise AI-enabled apps that can make your banking experience digital and interactive. How would you feel if you could do everything you do in a bank via your tablet?
Companies will build open APIs to scan digital cheques via an app and process them virtually. Thus, it makes the tedious work of cheque transfer convenient and paperless.
Get your Personal Financial Advisor via an app. Talk to the bot about the possibilities of your investments, get suggestions, and many more. Who knew you could manage finances this easily?
You can access cash without having to bring your debit/credit card. Instead, use the app directly for any payments, give a pin, and lo! You buy what you like.
We have already seen the implementation of APIs in some form or the other. The Future of Open Banking looks bright, and consumers have already begun getting used to the Digital space. Open Banking is committed to change the economic landscape for the best. With a check on the misuse of the strategies and enabling reliability and trust of customers, banks can redefine the digital evolution in a more elaborated manner with financial inclusion.
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A believer of good things and pursuer of diverse avocation, she is a fiction lover and a simple writer. Supriti has a number of professions to her list and she feels challenges are the only answers to failures.