Open banking has opened up an ever-increasing amount of new possibilities when it comes to faster and more secure banking products and services, for both clients and businesses.
However, with little customer education on the topic, a study earlier in the year found that over half of banking clients surveyed have never even heard of the term. This may lead to confusion and concerns on the consumer side. Fear not - let’s delve into the topic and pinpoint all the advantages of the service.
Let's start off with the basics: what is open banking? This term refers to a banking practice where banks and third-party financial service providers are securely supplied with information regarding transactions and other consumer data.
This is achieved through the use of APIs (application programming interfaces) and customer consent is required for sharing to commence. So why is this innovative banking technology so great?
1. Streamlined payments
Modern, fast-paced living expects speedy payments. Open banking makes this possible with OBeP (open banking ePayment), one of the most rapidly growing payment methods in the EMEA countries.
OBeP allows for payments to be transferred and received almost instantly. This is not only more convenient, but also reduces the risk of non-payment for any individual or company providing an online service. There are no additional waiting times and payment is immediately confirmed and guaranteed.
Data security within the digital sector has been a rising concern, especially over the last few years, and open banking isn’t an exception. Despite these concerns, the practice is as secure as your online bank.
Banks have existing technology platforms in place to begin with, such as SCA (Strong Customer Authentication), which requires two-step authorisation for an added layer of security. APIs also provide an extra barrier for fraud by encrypting data and securely transferring information.
Nordigen uses official PSD2-regulated APIs for bank connections. This prevents data breaches and ensures all mechanisms work securely and reliably. Additionally, all actions require consent from customers.
3. A tailored approach
The customisation offered by open banking makes for endless possibilities when it comes to financial services. Through open banking, digital platforms are able to consensually collect information on customers to create hyper-personalised experiences.
A tailored approach is desirable for banking service and product users. Customers have, time and time again, expressed a need for customised services and product offerings that are specific to their needs.
4. More choices
Through the emergence of open banking, more entrepreneurs and startups can now enter the financial market without being limited by traditional financial infrastructure.
Removing previously existing restrictions enables healthy competition to bloom within the sector. Open banking regulations have opened the door to an ever-growing variety of new services and products that benefit the customer.
5. One-stop solution
Mobile applications and digital services can now provide customers with the option to connect to all their bank accounts and payment systems through just one single app. This saves time and ensures that customers are aware of what is happening in all their accounts, at all times.
6. 100% online banking
Even before the trying times of the COVID-19 pandemic, visiting brick and mortar banks for any of your financial needs wasn’t really desirable.
Open banking takes this necessity out of the equation, allowing users to opt instead for a fully digital experience. With digital platforms growing in every business sector, reports suggest that customers are starting to expect the same from their financial solutions.
Any players that are able to develop in this way will more successfully establish themselves within the market.
While for some not having to visit a physical bank is simply undesirable, for others it might pose a more serious challenge.
People living in remote areas, individuals with disabilities, and those travelling outside the country have all been faced with the issue of inaccessibility to their financial services.
Open banking can help boil this down to one question: is technology available to you? If the answer is yes, then your financial platforms can be accessed remotely, providing you with more freedom and control at all times.
8. Speed and automation
Financial data and transactions being shared across all your finance platforms, helping create faster processes that ultimately benefit the client.
The data that’s being shared provides an accurate and detailed financial history. When securely shared with loan, credit, and mortgage officers, it can help automate and speed up the application process.
9. Traditional banking meets modern solutions
Within OB, banks and FinTech firms don’t necessarily need to be in competition with each other. Instead, open banking allows all players to connect their infrastructure to not only co-exist, but collaborate to create new, innovative solutions and services for customers.
This provides more room for growth and development in the financial sector, and ensures that more business and client needs will be met down the line.
10. The customer is king
The customer is central to the practice of open banking. A streamlined approach, ease of use, accessibility, speed, and a more tailored experience are all benefits of open banking.
As long as open banking keeps developing, collaboration and competition within the market will continue to evolve customer-focused services. This makes the process easier and more efficient for the end user: you.