Technology is increasingly creating options to maximize the value you get from your bank, beyond those basic services. Open banking is the practice of sharing financial information related to credit cards, statements, and account types and everything that includes the customer’s finances electronically, securely, and only under conditions that customers approve of information-sharing with specific parties.
Open banking connects banks, third-party providers (TPPs) and technical providers enabling them to simply and securely exchange data to their customers’ benefit. In the UK, regulations already require banks to cooperate with authorized TPPs. Application programming interfaces (APIs) allow TPPs to access financial information efficiently, which promotes the development of new apps and services to provide a better experience for consumers.
No more screen scraping
Screen scraping is a process of automated data gathering. It occurs when a customer discloses their Internet Banking Access ID and Password to third-party providers such as online lenders, financial management/investment app providers or accounting package providers, which enables them to use scraping technology to log in to their customer’s Internet Banking and copy transactional information to support their service. Through open banking, you no more need to share your access ID and password. APIs, give third-party providers direct access to the exact pieces of data they needed. For example, your account balance or specific transaction details.
What Open Banking Can Do for You
Helping customers in their operations
Obtaining answers and services tailored to each person’s needs becomes easier with Open Banking. This is because, due to the infinity of APIs that exist and that can arise, everything is simpler. All you need is access to technology. Time spent is reduced and operations are automated.
Getting or refinancing a loan may become easier. Instead of manually gathering information from a variety of sources and submitting it to a potential lender, consumers can permit lenders to just grab what they need directly and make them a better offer.
When your small company needs to get a loan or draw on a line of credit, lenders may want to review your books. Again, instead of submitting reports that could be inaccurate by the time lenders see them, lenders can pull all the data they need from your bank and accounting system.
New payment methods
Payments are a significant piece of European open banking regulation. Under the European Commission’s Second Payment Services Directive (PSD2), banks must allow third parties to initiate payments on their behalf. Again, this isn’t necessarily new (Venmo and PayPal are both non-bank products that you have probably used), but it will get easier for additional service providers to handle payments. Businesses may also benefit through reduced payment processing costs.
Open Banking is a great alternative to the current financial system. Traditional banking must face the new reality where banks are not the only players in the market. The current ecosystem is going to turn into a series of digital tools. The evolution of fintech is going to be a spectacular thing to witness. Even though there’s an understandable level of distrust towards changes, customers are the ones who will gain the most out of open banking.
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written by Athmeka Laksheman