All You Need to Know About Open Banking!

Open banking or open bank data is a technology that enables banks to share their customer data with competitors, apps, and others in a secure fashion. In other words, it helps banks to share the customer’s transaction, banking, and other financial data to third-party financial services using APIs.

As open banking requires the customer’s approval for data sharing, there’s nothing for the customers to worry about too! The data sharing between banks and other financial institutions happens through a process called screen scraping.

Open Banking From the Customer’s Perspective

It involves a new set of rules that apply to financial service providers. These rules enable banks and building societies to make an effort to help customers use their data. For example, you connect your bank account to an app that would review your spending and recommend a new product such as a credit card or savings account to save money for the future.

You can also sign up for a provider that displays all of your accounts with more than one bank in one place so you can have a better overview of all your finances. For consumers, the biggest takeaway is to get all their financial assets in one place and can easily compare the financial institutions’ fees and interest. It can also help track your spending habits and reach your financial goals easily. So does open banking help the average customer?

Better Customer Engagement

As customer data is available to a bank’s competitor and open banking, the banks are under pressure to provide a better customer experience to retain their users. This means that while open banking Third-Party Providers get hold of banking information, it coerces the banks to improve their services. So, instead of getting the messages via a third party, banks can compete by improving their PFM (Personal Financial Management) tools and transparency. They would also work on providing a competitive pricing and interest rate to their customers.

Helpful Third-Party Tools

You can see more third-party helpful tools such as PFM tools (these tools will help users to manage their finances better) coming into the foray. App developers will find an easier way of handling open APIs and control how it may even help you spend in a better way. With artificial intelligence coming into the picture, it can help control your spending in a big way.

However, some apps may not recommend you the best of products or services. They may even recommend a few that may include pay referrals or affiliate fees. You must always choose the tools that may help you with those that help you save money.

Refinancing Is Easier

It offers you what you can call streamline lending. So, instead of getting information from several sources and submitting everything to a prospective lender, consumers can then permit lenders to get what they need. And this makes it possible for the lenders to make a good option with open banking.

Easy Loan Processing

If you are a small company and may require a loan or may just need to draw the credit line, lenders may want to review your books. Instead of submitting a dated report, that may be inaccurate by the time lenders get access to them. Lenders can even get the data they need from the bank and your accounting system.

Cost-Effective

Businesses and consumers can use the less expensive accounting process. Integrated systems can help process payments, and it would reduce the time spent in the manual preparation of tasks.

Data Ownership

Banks cannot share data without the customer’s consent. This means that the user data is safe and shared with the new providers only if the customer is willing to do so.

Every provider will have to seek the customer’s permission individually before approaching the bank to source information. The customers can also withdraw their consent at any point if they find a need to do so!

Data sharing of any kind has its own share of risks. So, as customers and banks, it is important to ensure you are fully aware of the consequences of sharing sensitive information. It is also important to evaluate how third-party providers will use the information available before giving data sharing consent. With open banking, third-party providers can help you save, borrow, and pay money painlessly. But you need to use your judiciousness before you opt for open banking.