If you do not know what is Open Banking, here are some basics. Open Banking is a new Banking Practice which provides third-party Financial Service Providers Open Access to the Consumer Banking, Transaction and other Financial Data. These Data are available from Banks and Non-Bank Financial Institutions. Data is accessed by third-party services with the help of Application Programming Interfaces (APIs).
Open Banking allows and help Financial Services Customers to share the Financial Data securely with other Financial Institutions. It provides greater Financial Transparency options for account holders from Open Data to Private Data, using Open Source technology. The Open Banking concept was conceived for the ultimate purpose of improving Financial Services for customers. It will allow Financial Service provides to innovate on their product offerings to business significantly. Such innovative methods will be more effective and efficient financial tools for Business establishments especially payments. For Customers, Open Banking will provide better ways to spend, borrow and invest. Open Banking as its name signifies is not unsafe as data is exchanged and handled, protected by Cryptography.
How it works
Banks participating in Open Banking allow access of Customers’ personal and Financial Data to third-party service providers like Tech Startups and Online Financial Service Vendors. Customers have to grant consent to let the banks to allow access to their specific data. Third-Party APIs communicate with the Bank’s systems and access such data. Comparing Customers’ accounts and Transaction History to a range of Financial Service Options, aggregating data across participating Financial Institutions etc. can be potential uses of Open Banking.
Risks and potential threats
Though data and transaction are encrypted, Open Banking also poses security issues as the data is open to Third-Party providers. Hackers can find ways to hack into the network and gain access to key information and the ultimate risk of cleaning-up a customer’s account.
Here are some use cases of Open Banking.
- Making purchases on mobile devices, remittances, and currency conversions more convenient
- Offerings of customized products
- Personalization of banking services
- Accessing multiple accounts from a single app to monitor your financial status and purchases
- Enjoying the best deals with greater transparency. All financial data in one place means better credit decisions and more lucrative deals
- Nearly instantaneous credit and remittance
- A variety of payment methods such as credit cards, buy-now-pay-later, and the like
Some of the Open Banking examples are like Cleo, Cake, Moneybox, Plum, Tully, Plaid, Trustly etc.
You can read more about Open Banking at Verified Payments. There are many other resources available on the net to learn more about Open Banking.
Disclaimer: Information provided here is only for public awareness and collected from various sources. Understand everything about Open Banking before participating in it and start using it.