The future of banking lies in open banking. Open banking increases the usability of your accounts and increases its value. Its aim is to make the world of banking more open and accessible - making payments, borrowing money and saving money can all be simplified.
The benefits of open banking are considerable: customers benefit from improved experiences whilst banks will profit from new revenue streams. What’s more, with open banking, the service model becomes more sustainable for markets that were previously underserved.
What is open banking?
Open banking (OB) involves the electronic sharing of customers financial information. Not to worry though, it is all done safely and securely. Only approved third parties are able to access this information and the customer's permission is also required in order to release the information.
Open Application Programming Interfaces, or Open APIs, are a key aspect in OB. They enable the sharing of information across providers. They also allow developers to build apps that are based around a particular financial institution and develop services relevant to their customers. This enables easy access and adaption to OB platforms that are already out there, and the creation of new ones. The platforms created also work with mobile and online banking.
Why should banks get involved?
Open banking provides a better experience for customers. For most banks, customer satisfaction should be at the heart of their ethos and building out their open banking ecosystem should increase or result in greater customer satisfaction. There are some fabulous financial benefits too. A study by PWC and the Open Data Institute concluded that by 2022, a massive 7.2 billion pounds in revenue opportunity will have been raised from open banking. As well as offering information on accounts, loans and credit cards, it is also possible for banks to branch out. Providing comparisons for things like car loans or utilities might also be an option. So if the aim of open banking is to improve customer experience, how and why does it do this?
Improving client experience
In a world without open banking, clients experience would be severely limited. In order to keep customers happy, banks need to adapt to the ever changing and ever evolving technological world. OB is all about giving the customer the power to make informed choices - without effort and complication. The benefits for customers are significant. Instead of filling in lengthy forms when applying for loans, credit cards and savings accounts, the majority of information can be accessed by third parties easily. This saves the customer both time and money as they can check out and access the best deals for themselves. Information is also available on-the-go through the use of effectively developed apps. Open banking really is the way forward.
Gone are the days of sticking with one provider
Open banking is a regulatory-led initiative. Open Banking in the UK was set up by the Competition and Markets Authority, in line with European PSD2 regulations. Its aim is to give customers more choice and encourage competition within the banking world. This ensures that customers are put first and are able to access better deals as the competition from providers heats up!
Does this impact on privacy?
Not at all. Payment service providers take full responsibility for security. Even though PSD2 requires banks to open their data to 3rd parties, it is the customer that remains in control of their data usage. In addition, the new European wide GDPR legislation (General Data Privacy Rules) means that customers’ data privacy is of utmost importance. Companies are obliged to seek their customers’ consent and face harsh penalties if data is breached. This means that all parties must work together for their customers in open banking.
So it really is the future?
Yes, it really is! Open banking is already available to customers in certain formats. These formats are bound to change and evolve as time passes, opening up even more opportunities. For banks, building out their open banking ecosystem really is beneficial for all parties. It vastly improves the experience for both the bank and the client. Everyone's a winner!