Innovation is crucial to the success and continuation of any business or industry. One of the most important innovations in the banking 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 United Kingdom’s main banks securely released their data to legitimate online 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.
Now I know this may sound scary. Sort of like free data for all! Think again. One of the main struggles Open Banking faces as it starts to become more popular is that people do not seem to trust it. They think that their financial information is just out in the open, for anyone to see. However, it is just as secure as online banking, people just aren’t made aware of it yet.
First of all, you have to give your consent in order for your data to be shared. Once consent is given, this 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. So, don’t worry.
Do you have to give consent if you don’t want to? Absolutely not, but let’s find out why you should.
Open Banking 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 a consumer’s financial records have the ability to recommend how that consumer can save every penny possible and get them deals that are individualised.
Now, let’s talk about lending. It becomes much simpler, and who wouldn’t want that? Typically, when a consumer needs a loan from the bank, a lot of time and effort goes into showing the bank your finances to convince them that you are eligible for a loan. With Open Banking, this can be done online or through an app to prevent unnecessary travelling to the bank’s branch. All accounts in one place, saving you time and frustration so you can get on with life.
Back to the concept of all accounts in one place, how annoying is it to keep track of multiple accounts with different banks on different mobile apps or websites? When a consumer holds accounts with two separate banks, the software of each bank is not compatible with one another. This forces the consumer to constantly jump back and forth between apps or websites to check their finances. With Open Banking, this doesn’t have to happen anymore. Open Banking will allow apps to store accounts with two or more banks, hassle free and securely, in one place with the use of API’s.
A, P, What?
API! An application programming interface. Those three words aren’t helpful enough? I didn’t think so.
API’s can do a majority 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.
API’s basically 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 allowing the application to see your current location.
Open Banking In A Wrap
In such as 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 banking industry. Customers will get the highest quality services that they deserve. After all, customers are the focus of the Open Banking innovation.
By Tess Korinko
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