Although some people view it as an episode of Black Mirror waiting to happen, Open Banking is a significant innovation for the financial future that aims to empower consumers financially..
Open Banking is designed to benefit the customer by expanding the typical communication between them and their bank. Using an open connection between application programming interfaces (APIs), the financial information that was once only accessible to the bank can now – with the customer's consent – be shared with another financially regulated institution or a third party, such as fintech developers.
At this point, a lot of people become unsettled. As a customer, an initial thought might be why would I ever share my financial data?
Well, there are a few reasons. Let's start with the one people tend to worry about:.
The idea of sharing financial data immediately causes people to question the concept's security. To be clear, 'sharing' in this context does not mean throwing out private information to anyone with an internet connection. Customers choose the data they share, which authorised third parties they share it with, and even for how long the information is shared.
This isn't to say that it is without any risks. The truth is, anyone using an online bank account is already engaging in a similar level of risk that comes with Open Banking. Third parties are highly regulated and are required to state whether they are authorised to provide services related to Open Banking. A list of these regulated providers can be found here.
Open Banking aims to save people money, but an indirect process is that it also saves them time – a significant amount of it.
Take residential mortgages for example. Getting an application approved can often take weeks, not to mention an absurd pile of past bills and statements. But with your financial data already accessible, the process may only take a day or even hours. Better yet, open banking can show customers their best options based on their preferences or the information they've provided beforehand.
Think of your bank like a local store. They might offer a few things that you need, but it might be priced better at a different store, or maybe a different location has more options to choose from.
In this way, Open Banking is more like shopping at a mall. These local stores are brought together under one digital roof so customers can personalise their products and services by choosing options from multiple financial partners. The advantages that come with this are better prices, a wider range of choices, and incomparable convenience.
Open Banking aims to help customers spend and save more wisely by giving them the best possible understanding of their financial habits and providing more options for financial products and services. Though concerns around safety exist, the systems are heavily regulated, and consumers can opt-out at any point. Open Banking is an innovative approach that lets customers control their finances and offers modern solutions to the way people bank.
DNA Payments continues to find new ways to support promising businesses and change the payments industry. To learn more about Open Banking and how it can benefit you, contact one of our experts today.