What is Open Banking and what are the benefits?
Open Banking is a new European initiative to encourage competition in the financial industry to provide better experiences for customers.
One of the most important innovations in the financial industry has been Open Banking. But what is it? How can it help? Is it safe?
OPEN BANKING - AN OVERVIEW
Innovation is crucial to the success and continuation of any business or industry. One of the most important innovations in the financial industry has been Open Banking. But what is it? How can it help? Is it safe?
As of 13 January 2018, the way we move and use money has been changed for the better. This is when banking data opened up and the UK’s main banks securely released their data to legitimate, authorised organisations.
Open Banking, put in the simplest of terms, means that with a consumer’s permission, third party providers other than the consumer’s bank, will have access to their financial data.
OPEN BANKING - SAFETY FIRST
As a concept it can be quite intimidating, especially considering how important it is to protect our data more than ever before. One of the main struggles Open Banking faces as it starts to become more popular is that people do not seem to trust it. However, it is just as secure as traditional online banking.
The most important part of Open Banking is the element of consent. You have to give your consent in order for your data to be shared with anyone that isn’t your bank. Once consent is given, the data will be encrypted, and only regulated and trustworthy firms will have access to it. All banks have a responsibility to protect your data and they invest a lot of money into this protection plan.
Do you have to give consent if you don’t want to? Absolutely not, but there are clear benefits should you decided to do so. You should also bear in mind that you can withdraw your consent at any time and even if you forget who you’ve given access to your data, it will expire after 90 days unless you renew the connection.
OPEN BANKING - THE BENEFITS
If you want to have more control over your finances and the ability to analyse your spending habits, Open Banking is the way to go. The third-party providers that gain access to your financial records have the ability to recommend how you can save every penny possible and are able to offer you individual and tailored rewards.
It becomes much simpler when trying to apply for a new account or loan or mortgage. Typically, when you need a loan from the bank, a large proportion of the process is ensuring you have the finances and ability to repay the bank. With Open Banking, this can all be done online or through an app and can prevent the disruption of having to travel to the bank’s branch.
Additionally, as seems to be more common these days, if you hold accounts with at least two separate banks, the software of each bank tends not to be compatible with one another. This makes it extremely difficult to keep track of your multiple accounts using different apps or websites, as you’re forced to constantly jump back and forth between them to check balances. With Open Banking, this doesn’t have to be the case anymore. Open Banking will allow you to manage accounts from multiple banks and other financial institutions, hassle free and securely, all in one place.
With all your accounts in one place, we can save you so much time and frustration.
OPEN BANKING - CONNECTING TO YOUR BANK
A big question is how authorised third parties securely connect to banks to ensure data isn’t compromised. In technical terms companies use what’s called an API, or Application Programming Interface.
APIs can do lots of things but, most importantly, they play a huge role in security. Ultimately, they control the access to hardware devices and specific software functions that an application may not necessarily have the permission to use.
APIs in essence reveal the internal functions of a program without having to share all of the software’s code. This is important because it allows mobile applications to access big web services. For example, an API will allow an app like Google Maps to tap into GPS services without sharing code, but it will allow the application to see your current location.
OPEN BANKING - a summary
In such a fast paced society, everyone is looking for efficiency and speed. Both of these factors increase with Open Banking because banks can authenticate a payment without the hassle of involving other organisations such as an acquirer.
Open Banking is creating stiff competition in the financial industry. Customers will get the highest quality services that they deserve. After all, customers are the focus of the Open Banking innovation.
Let’s make a difference.
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