The financial sector is currently undergoing a huge transformation, and open banking is one of the most important trends to look out for. As consumers have ever-changing expectations for their banking services, financial institutions must adapt to the new reality to survive. In this article, we will discuss what open banking is and the impacts it has on the industry.
What is open banking?
Open banking is a financial model that allows users to share their financial data with authorised third-parties through a secure API (Application Programming Interface). This model makes banking a lot more accessible and user-friendly, as external developers can build useful applications around financial institutions.
The whole idea of open banking is that financial data belongs to the customer, not the bank. It is a new and more customer-centric approach to banking, which brings a variety of different benefits. Most importantly, the industry still has strict regulations, meaning customers can maintain full control of who can access their personal data.
Key benefits to the consumers
Here are some of the positive ways open banking impacts financial customers:
Financial control and transparency
With open banking, customers can view all of their accounts from various different banks in a single place. This makes it a lot easier to manage your finances and track spendings. The centralisation can also help customers budget better and make informed decisions about their finances, comparing offerings across providers. You can even set financial goals and receive alerts related to your spending patterns, which provides further assistance in controlling your spendings and savings.
Personalised services
Open banking creates a lot of opportunities for personalised products and services thanks to smart data analysis. These systems can match individual spending patterns and transaction history to offer services unique to your needs, such as a personalised savings plan or a tailored loan product. This could include credit scoring or investment recommendations as well, providing customers with bespoke solutions that will suit their individual circumstances.
Industry innovation
One of the biggest advantages of open banking APIs is how they encourage the creation of completely new and innovative solutions. Banks and fintechs around the globe are now offering such services as:
- Real-time budgeting tools that provide users feedback about their spending;
- AI-powered financial advisors, which help customers understand complex financial topics and, therefore, make better informed investment decisions;
- Automated savings solutions, which allow users to set aside money seamlessly, based on their spending behaviour;
- Instant payment verification systems that improve data security and increase the speed of transactions.
These innovations are just the tip of the iceberg, though. As open banking becomes more common across the industry, customers will benefit from an increasing amount of innovative services. For example, some companies are developing financial fitness apps that gamify savings and investing for younger generations.
Enhanced payment solutions
Payment processing is another area benefiting from open banking. It is becoming increasingly efficient thanks to direct account-to-account transfers which are available because of the API. This does not only help individuals, but businesses too, as transactions cost less than traditional card payments as well as happen instantly. It allows small businesses to manage their cash flows more effectively too, simplifying the process and eliminating unnecessary delays.
Leading service providers
If you are wondering where to go for open banking services, there are numerous great providers out there. Here are the leading players in the industry:
Prometeo
The largest open banking platform in the whole of Latin America, Prometeoapi seamlessly connects banks from the region with the US banks. Their API infrastructure includes such services cash management, bank account verification, bank transfer payments, payment links, and QR payments to make transactions between different platforms easier than ever. Prometeo play a huge role in driving digital information in Latin America, where traditional banking services can often lag behind.
TrueLayer
Focusing on the UK and Europe market, TrueLayer is a platform that provides API infrastructure to power a variety of open banking services. They facilitate secure data access and payments, making it easier for developers to create new financial applications. TrueLayer aims to provide user-friendly tools, boosting financial innovation in European markets.
GoCardless
GoCardless is another leading service provider in the open banking sector. Specialising in direct bank payments, they simplify transaction processes for businesses and consumers. As such, they make payment management a lot more straightforward, particularly for subscriptions and recurring payments. Having introduced this as a service among an existing popular set of products, GoCardless is showcasing their strong commitment to innovation.
Conclusion
When it comes to changes in the financial industry, open banking is much more than just a new technology – it is a huge swift, which will completely change the way people manage their money. As it keeps developing, we can expect more innovation, which will make financial services even more personalised and efficient.
