Mon. Jul 6th, 2020

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The Open Banking Standard

3 min read
Open banking system

There is no doubt the Open Banking gives customers great transparency in choice when it comes to managing their finances. Open Banking aims to re-energize banking by making easier for customers in small to medium-sized businesses to get access on their transaction data. Open Banking gives consent to regulated third parties to securely proceed with transactions and payments online.

Open Banking is an exciting new development aiming to improve competition and innovation in the banking industry. It can transform the way customers apply for credit by enabling individuals and businesses to share their bank transaction data seamlessly and securely online, without having to fill out paperwork, scan their data or provide information manually every time.

Open Banking has the ability to transform the online credit application process- helping both individuals and businesses to use their financial transaction data to access and compare products more easily.

There is no doubt the Open Banking provides the customer’s transparency in choice when it comes to managing their finances.  The additional data available can allow companies to develop new more-tailored products that will help in services.

 

THREE PRINCIPLES OF OPEN BANKING:

Open Banking fundamentally is about driving competition into the provision of financial services for consumers and for businesses. Three principles underpin it.

  • The real-time sharing of transaction data, that is, the bank statements.
  • The real-time initiation of payments. So, at the moment you might pay for something through your debit card or credit card. Open banking will open up the market to other organizations to initiate payments for you.
  • It is the provision of information on products and services and in association with that customer service levels and to enable comparison between products and services to take place.

The idea is that it enables new services to come to market provided by new organizations outside of the established banks to service customers in relation to a whole variety of different, potentially new services that customers can consume.

WHAT CHANGE WILL OPEN BANKING BRING?

There will be various changes but fundamentally, it is about opening up access to your transaction information to organizations that previously you would not have shared this data with. In association with that, there is a whole range of new compliance and governance issues that need to be looked at and addressed to help protect the interests of consumers. Therefore, to sum it up, Open Banking looks for the issues of security, of governance to understand what is happening to your data. It helps consumers extract value from the data as many customers just do not understand the value that could be associated with their transactional information. Moreover, qualifying of those individuals to make sure that the organizations who are sharing data are bone fide organizations and have the right governance and security processes in place to safeguard the interests of consumers qualifying that the customer who is agreeing to share their data is who they say that they are.

Open Banking is a structure under which banks open up their application programming interfaces (APIs), allowing third parties to access financial information that is needed to develop new applications and services and providing account holders greater financial transparency options.

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