Why should I use open banking?
Open banking can be a boon for your business. It allows businesses to share financial information with one another electronically and securely.
Sometimes known as "open bank data," open banking allows third-party providers of financial services to access a consumer's banking and other financial data. In short, open banking allows businesses to share financial information with one another electronically and securely.
With open banking, you can network accounts and data across institutions. This is accomplished through the use of application programming interfaces, more commonly known as APIs. Businesses that rely on open banking can use it to improve their product offerings, such as:
- Examining a customer's financial transaction history to suggest financial products that might benefit the customer
- Getting a deeper understanding of a consumer's financial status, so more appropriate loan terms can be offered to the customer
- Monitoring a customer's account in order to quickly identify fraudulent activity
- Offering savings account and credit card options that better match the customer's financial profile
The streamlining of information through open banking also can reduce a business' costs.
Customers also benefit from open banking. The electronic sharing of financial information helps facilitate borrowing and payment for these customers. A consumer who has multiple accounts -- such as credit cards, insurance policies, retirement accounts -- with various providers might be able to get a single view of all accounts and to make direct payments from them.
And consumers remain in control of the process: The sharing of financial information occurs only if the customer approves it.
Because third-party providers can access financial information more easily, it should allow them to develop better apps and services that will benefit consumers.
Open banking provides tremendous opportunities for both financial institutions and customers. But it is not without risk. The sharing of a customer's private financial information also raises the possibility of hackers stealing this data. Not only does that put the consumer's finances at risk, but it raises potential liability concerns for businesses that use open banking. Thus, robust security systems are a vital part of making open banking work for you.
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