Open Banking: Why You Should Choose It?

These are interesting times when the world of finance continues to evolve. This evolution thins out the mainstream understanding of finance and how to apply its innovations to human endeavours such as budget management and investments. One such innovation is the Open Banking.

Open Banking represents an ecosystem where financial institutions share data with regulated third-party service providers, all with the customer’s consent. The goal is to create greater financial transparency and provide customers with better core banking solutions while giving them control over their financial data.

For more information, read our full article on Open Banking and why you should choose it. Continue reading!

What is Open Banking?

Open Banking, also known as open bank data, is the banking practice regulated by third-party financial service providers (FSPs) that are open to accessing consumer data from banks and other financial institutions. The practice shares financial data between banks and third-party service providers using APIs (Application Programming Interface).

The information shared in Open Banking, which usually includes transaction history, account statements, and other banking details, is a boon for the end users. It extends the scope of finance, allowing service providers, including fintech applications, to use this information to tap into valuable data insights. This, in turn, leads to the development of more customer-focused products, speeding up innovation and fostering a competitive marketplace in the finance sector, all for the benefit of the end users.

Don’t confuse Open Banking with Open Finance

While Open Banking and Open Finance are like two peas in a pod, they are different. Open Banking builds the framework of open finance. Open finance is an extension of the former, where open finance allows products and services to access transaction data from any platform where a user’s financial data is located. Here, authorized third-party providers can draw from financial data from any platform, like crowdfunding platforms, lending marketplaces, and cryptocurrency solutions that do not even exist within banking institutions.

Benefits of Open Banking

Open Banking opens your gateway for financial planning and investments. It provides features previously unheard of in global financial markets, especially for people with little experience in the sector.

Here are the top 7 benefits of why you should be opening up your banking data to the world:

1. Access to Range of Services

By opening to third-party financial institutions and fintech service providers, customers can use innovative core banking solutions better suited to their needs, such as budget management, investments, loans, and insurance.

2. Better Experience and Personalised Services

By sharing their financial data with trusted third parties, banking customers experience better, personalised services that are more practical solutions for their financial needs. You can move, manage, and make more money according to your needs.

3. Fostering Competition

Healthy competition is always beneficial. Enabling collaboration between traditional financial institutions and fintech service providers stimulates the development of new solutions and applications in financial services. Customers take advantage of improved products and services at better prices.

4. Account Management

Customers allow Fintech to leverage Open Banking and offer account management services. These services allow customers to manage all their bank accounts on a single platform, giving them a complete view (transactions, balances, and expenses) of their financial situation using a single application.

5. Better Planning

Offering your data to Fintech allows them to analyse your spending and saving patterns and offer personalised recommendations for improving financial health.

6. Simplified Payments

With Open Banking, Fintech offers an easy payment option system. Users can make faster and safer payments and transfers. A single digital banking software offers mobile payment solutions, cheaper and faster international transfers, and more convenient foreign exchange services.

7. Lending and Financing

With Open Banking, you allow Fintechs to streamline the loan application and approval process. Accessing users' financial data helps them assess customers’ creditworthiness more efficiently and personalized, streamlining the lending process and other core banking solutions. They also leverage financial data obtained through Open Banking to offer personalized financial advisory services.

Though it may seem paradoxical, Open Banking offers greater security and control over your financial data. That sometimes is the need of an hour. It is especially true when you are into financial planning. You will have full control over the type of financial services you take; customers can decide what data they share, with whom they share it, and for how long. You can manage and control your financial data and its responsible use by organizations.

Conclusion

Open Banking has been the basis of great innovations. For example, you can implement A2A payments with Open Banking and bring in a frictionless payment system. Partner with PureSoftware and continue enjoying the benefits of Open Banking.

PureSoftware is a global software product company driving transformation for the world’s top organizations across various industry verticals, including banking, financial services, insurance, high-tech, and communication. Our product, Arrtha- one of the core banking solutions, is a globally trusted financial technology platform.