What is Open Banking?
It is a term used in financial services as an element of the financial technology that indicates the usage of open APIs. It allows third-party developers to develop financial products, applications, and modes of services for the concerned financial institution.
The prime aim of open banking is to maintain the utmost level of transparency for the customers having accounts. Here, open-source technology is used to maintain the best service standard and transparency level. However, a user or customer needs to know how to open internet banking to make the most of these advantages.
Underneath the Concept of Open Banking
The purpose of open banking is to share financial details through electronic mode, though only under the approval of the concerned customer. Application Programming Interface or APIs let the third-party product or service provider have access to the financial detail. Thus, this concept encourages the development of feature-rich open banking apps.
Through open banking architecture, the service providers manage to deliver fully furnished services in a much more secure and sleek way. The tools like Mint; using details of your bank account provide various services are great open banking examples.
Open banking encourages creativity in the financial service arena. The term originally was highlighted by Henry Chesbrough. However, the concept is becoming widely accepted and rising in popularity around the globe. Open banking in India is obviously encouraging, considering the massive customer base.
The initial versions of the personal financial management applications needed the users to put the same details used for accessing the bank account. Through different open banking use cases, the service standard is streamlined and indeed secured.
How can Open Banking be Effective for You?
Open banking as a concept has indeed revolutionized the scenario for most of the financial institutions. The level of ease and assurance provided for the users or consumers is equally incredible, as well. Above all, it provides greater options and facilities to handle finance, lending, and transactions. There are varieties of open banking solutions that have increased or widened the scope for the developers in many ways.
Changing Scenarios for the Banks
The concept of open banking lets the third-party service providers have details of the bank. However, banks hold the right to take decisions on whether to enhance the standard of service they deliver. The scenario has turned out to be such that the open banking providers are competing among themselves to enhance the standard of PFM tools. Moreover, the tools which maintain the transparency level in a better way are preferred the most. The other wing of competition is to keep the service cost or the transaction costs to a minimal extent.
The Advent of High-End Tools
Open banking is trending high, in modern times. However, open banking regulation norms are expected to be modified through the intervention of artificial intelligence. The standard of service is expected to get even more enriched. Through AI, the standard of features can be enriched as it gets easier to speculate the actions or events in a concerned account or on any specific product. At the same time enhancing user-experience, this can save time and money for the user as well. It is important, though, to make users aware of the facilities of such at the same time all about what is open banking and why does it matter.
Though the role of the third-party services is highly appreciated, there are various concerns associated with it. It is being claimed that certain apps do not suggest the best products or service options to the customers. Rather, they recommend or refer the ones that involve fees for referral or affiliation. It is thus important to select the tools smartly.
Enhancing the Modes of Lending and Loan Processing
According to experts, the modes of granting the loans can be simpler through the inception of open banking. Rather than following the manual modes of collection information or conducting surveys which are time-consuming in nature, the usage of tools can make it look way faster.
It makes things easier for the lenders as they can spontaneously grab details of the things straight away through the app. Most importantly, through an enriched open banking ecosystem, lenders can have the most updated access to all the checking needs, as well as the saving accounts. It makes transactions pretty fast, as well.
Not just the personal loan; the open banking concept makes things incredible for the business groups to have loans as well. On those occasions, when a business group looks for a loan, it may feel essential for the lenders to have a look at the books. The process of submitting the reports can be erroneous by the while lenders goes through the same. Through open banking benefits, the lenders can manage to collect the entire set of data they want through the concerned bank you have your account at. They can collect data through the credit card issuing house as well.
Immediate Update, Cost-effective Transactions
High-end open banking software involves incredible benefits for users. It makes the entire process look much swifter and simpler. Business groups can get the advantage of simpler and cost-effective bookkeeping. Similar is the case about updating the entire system as well. Built-in systems can spontaneously update when a user delivers or receives the payments. Also, the customer may enjoy the simpler processing as the manual modes of taxation get smoother.
Transparent and Avoiding Corruption
It can be thoroughly claimed that the occurrences of frauds have immensely reduced through open banking. The open banking platform in India thus has become much safer and reliable. Financial institutions and the third-party services go through or scan through the transactions made smoothly using an open banking platform. Things get even more superior standards through data provided by artificial intelligence. Specifically, the minute level details like monthly charges applied for each transaction can be easily gotten. Details can be gathered in a much quicker fashion, as well.
Changing Scenarios From Future Perspectives
It services have no doubt streamlined the functioning of financial institutions. Now because the major banks have allowed third parties to process payments, various independent platforms are expected to emerge. Though people are used to with platforms like PayPal, the added open banking services can be even more exciting in many ways. It is going to be much more easier to handle the payment related aspects. Specifically, international transactions are going to be much more convenient and cost-effective.
Security Aspects
A lot has been discussed about the safety aspects of the open banking. The prime concept of open banking is data sharing. Banks and financial institutions understand this fact, and thus use high-end security arrangements to provide proper encryption and safeguard the secret details. Specifically, open banking concepts, particularly mentioning when and the way banks can share the details, makes things assured for the users.
Moreover, the users hold the ability to authenticate the transaction, which ensures greater safety. However, the news of tech giants like Facebook collecting data of the customers through banks and financial institutions is obvious to raise eyebrows. But, as control is in the hands of the banks, they would never wish to lose control. This is the reason that the transaction is assured.
Open banking is considered innovative and path-breaking. It is not the one of its kind, though. Experts compare it with Fintech companies. Association between Fintech and financial institutions has started appearing in different ways. Open banking Fintech has one thing in common, that is depending upon the digital transactions. However, through advanced third-party services, banks forming digital supplements for over the web functionality is certainly going to have an alternative.
Data: the real asset
It is not a secret that data is the core element on which the entire open banking model is based. The user indeed holds the right, but it has to get shared with the others as per this concept. Specifically, the facility of making payments over social platforms makes the details wide and open.
Many start-up companies would be eager to analyze spending. However, this is essentially not a security breach or anything of the sort. It is something like sharing the details for the business or transaction of another party. In return, the service providers ensure the greater user-experience.
Ultimately, those who claim about ownership of money, the scenario of the entire financial model is going to be transformed greatly in upcoming days. Specifically, concepts like open banking fuelled by artificial intelligence are going to make the modes of transaction moreover data-oriented.
With traditional modes of cash-based transactions getting minuscule, the entire financial model is going to be under the hilt of technology-based houses. Anyway, as far as customer satisfaction and safety is ensured, the effectiveness of any mode of the transaction should be welcomed.
