A lot has changed in the world of finance. Technology has made tremendous strides in all types of markets and businesses: communications, entertainment, sports, art, and more. The banking system, which has been adjusting to the new digital era for some years now, has not been overlooked in these advances. Also known as “open bank data”, open banking has become a driving force for innovation in the banking industry. It allows people to securely share their financial data with other financial organizations by relying on networks rather than bureaucracy.
What Is Open Banking?
Open Banking is a new financial service that allows regulated third-party providers to securely access personal banking and other financial data, provided the customer approves of this.
Data related to credit cards, statements, and account types constitute the backbone of Open Banking. Syncing this information with a variety of emerging applications initiates a process that facilitates and enhances the customer experience. Open banking may allow bankers to obtain a more accurate understanding of a customer’s financial status and risk level, allowing them to offer more profitable loan terms. While it is a competitive landscape, it has the potential to reshape customer experience of the finance industry.
How Does Open Banking Work?
The “opening up” of this data is done through Application Programming Interfaces (APIs). APIs, which enable data to be exposed securely and effectively, are fundamental parts of any technology infrastructure. Banks have traditionally used screen scraping to expose data. As a result, there is a high chance of fraudulent transactions and a compromise on security.
Simply put, an API (Application Programming Interface) is a method for one program to provide services to another program in a standardized manner.
Banks are responsible for designing and executing these APIs once everyone participating in the open banking project has agreed on them. Businesses can then access them and use them to create new, innovative products.
What Data Does Open Banking Help Open Up?
There are three types of broad topics that open banking helps open up;
- Account Data
Account data is what you normally expect to see:
- Account holder’s name
- Account type
- Currency
- Date the account was opened
- Information about transactions
- Product Data
Product information refers to the products and services that a financial institution may provide. In the past, people would have to visit a bank branch to learn about the services available to them as a customer. They can now call or, better yet, visit their website. Open banking, on the other hand, puts this information into a common format, making it easier for others to present you with the best possibilities.
- Payment Initiation
Making payments from one bank account to another is what payment initiation is all about. Instead of needing to enter into online banking and go through the payment process step by step, open banking allows other software, apps, or websites to commence and speed up the payment process if the account user explicitly consents.
To Conclude
Open Banking, with its advanced banking technology, is on track to be a breakthrough for banks, their fintech partners, and billions of banking customers across the globe. Payments are promptly confirmed, giving you and your customers more visibility, less time wasted pursuing one-time payments and a better customer experience.
In order to create a successful offering, banks will need to find new ways of working, prototyping quickly and testing them with clients. With Open Banking-powered services such as OpenPayd, you are able to offer differentiated, tailored products and stable, reliable systems that can scale to increased demand and provide fast service. Speak to a team of experts to get started today!