Chances are you most likely use a checking account to make most of your monthly payments and that you probably borrowed money from a bank to buy a home or another large purchase. You will be glad to hear that technological developments are being created to enlarge the amount of value you can potentially get from your bank. Using open banking, third-party providers, also known as TTPs, can help customers such as you save money, borrow money easily, and pay faster.
Open banking has been picking up steam for a while now in the U.K. and the USA. In the United Kingdom, financial regulations have already required banks to cooperate with authorized third-party providers. [1] In the USA, some banks have voluntarily made data available and this data-sharing trend will most likely continue with or without data-sharing being made a requirement. [2]
The Definition of Open Banking:
Open banking is the banking practice in which financial information is shared securely via electronic means. [3] Most importantly, the practice of open banking is only used under conditions that customers approve of. How it works is application programming interfaces (APIs) allow TPPs to obtain access to financial information quickly, which then promotes new application and services development. [4] The use of open banking should streamline the consumer banking experience in a variety of ways.
Benefits of Open Banking
There are many beneficial aspects of open banking.
By using APIs, you can give bank websites the access to the exact portions of data they require, such as specific transaction details you need or your account balance. No matter how many times your bank may rework their website, APIs will always get the precise portions of data you need to the right place. As an added plus of using open banking APIs, you don’t even need to tell anybody your password to use an API.
Using open banking, lending should be easier than ever to obtain. As opposed to manually gathering information from a plethora of sources and submitting it to a possible lender, consumers can let lenders grab whatever data they need directly and make the consumers a better offer. [3]
With the advent of open banking allowing TPPs to access information from banks, the banks may decide to improve their own services. After all, instead of letting someone besides the bank control the messages customers receive, banks can compete with improved banking tools and transparent as well as competitive pricing. [5]
This article was written by Ian, an intern at Irish Mortgage Brokers and Yes.ie from the USA.
References:
[1] Open Banking. “What is Open Banking?,
https://www.openbanking.org.uk/customers/what-is-open-banking/”
Accessed July 8, 2020
[2] PwC. “Open Banking: US Is Next,
https://www.pwc.com/us/en/industries/financial-services/financial-crimes/library/open-banking.html” Accessed July 8, 2020
[3] Pinsent Masons. “Open Banking Will Facilitate Home Loan Switching,
https://www.pinsentmasons.com/out-law/analysis/open-banking-will-facilitate-home-loan-switching.” Accessed July 8, 2020
[4] BBVA. “United States Confronts Open Banking,
https://bbvaopen4u.com/en/actualidad/united-states-confronts-open-banking”
Accessed July 8, 2020
[5] Mastercard. “Delivering on the Promises of Open Banking,
https://www.mastercard.us/content/dam/public/mastercardcom/na/us/en/documents/white-paper-delivering-promises-open-banking.pdf”
Accessed July 8, 2020