The Increasing Power of Open Banking
We live in a world where almost everything and everyone is more connected than ever, but still, there is something missing: our bank accounts. Well, thanks to the rise of open banking, that’s not going to be the case in the near future. The system lets bank customers share their account information with third-party applications, and the reason this technology had not been available before is, of course, the security concerns. Even today, this may seem unsecured, but when you see what happens in the background, you’ll realise that it is safer than the banking systems we have today.
What is open banking, actually?
With financial technologies becoming more and more advanced, the banking industry has gone in a new and exciting direction after a long time. Due to its nature, banking is not one of the sectors that you can call revisionist. For decades, we haven’t seen much progress in the area. Credit cards may have been the last revolution of the industry, and now, we have open banking. As we have mentioned, open banking allows customers and businesses to share their financial information with third-party applications securely. In an age where data is more valuable than actual money, this was always inevitable.
When you think about all of the account trafficking information, you may understand why open banking heralds a whole new era in the history of banking. The ability to share information with third-party APIs gives customers a great deal of freedom. Of course, customer permission is the first rule in open banking. Here are some of the groundbreaking things that come with open banking.
Accessing all of the accounts in one interface
Open banking lets customers and businesses access multiple bank accounts in the same application. For example, customers can access all of their other bank accounts in their main banking applications. The best use case of this is for small-to-medium businesses that need to use more than two bank accounts for money transfers. With open banking, enterprises can make money transactions in the same application.
Categorising expenses and incomes
If customers let their banks share information with budget keeping apps, they can see how much they’ve earned and how much they’ve spent on each category. The same rules apply for businesses on a bigger scale, which leads accounting departments to work even more effectively.
Better accounting for everyone
Sharing bank account history and expense behaviours with third-party applications gives customers better insight into their budgeting. On top of that, applications can offer the best deals on loans with comparisons.
Open banking is going global
Open banking is in the mind of every industry leader today, but it was not an easy process for open banking to be accepted as it is today. Thanks to the publication of PSD2 (Payment Services Directive 2), Europe has finally opened its gates to open banking’s secure nature.
The UK was the quickest country to adapt to the open banking model, and with PSD2, European banks followed the trend as fast as possible. As of September 2019, there were 143 providers regulated by the UK Financial Conduct Authority who have enrolled in open banking. Australia is another country which has adapted to the new system. The country announced that all of the leading banks must provide access to consumer, account, and transaction data by February 2020. The next step for Australia is making mortgage accounts, overdrafts, personal loans, leases, and asset finance available by July 2021. Countries like Canada, South Korea, and Japan are moving fast with open banking adoption as well. Of course, with the new regulations, the US, Nigeria, New Zealand, Kenya and more countries are adopting the new-age banking system. It is safe to say that open banking is going to be the new normal for the banking industry all around the globe sooner than expected.
The most significant force of growth for open banking is the massive demand
Banks are one of the leading forces of the open banking transformation because they know the first-comers will be the biggest winners of the new system. In the last quarter of 2019, banks have seen immense growth thanks to APIs, and today, almost all of them are developing their own APIs to share information securely. According to NordicAPIs, banks have seen a 19% growth with API platforms. When you add banks’ own APIs and all of the FinTech companies to the picture, you can expect a whole new banking experience as soon as next year.
With more and more customers getting used to the convenience of open banking, the demand on the end-user front is also rising exponentially. Even more so during the COVID-19 pandemic, people all around the globe have been searching for new ways to do their transactions in a more convenient, affordable, and of course, remote way. Open banking’s unified nature has led more FinTech companies and banks to work better and together, which has been a real convenience for the bank customers, and the underbanked, even.
What we offer
Here at Tmob, we have been building tailor-made solutions for many businesses including banks, FinTech startups, the FMCG industry, aviation, and more. One of our clients in e-banking, Vive Bank UK has built their new-age banking system with our E-Banking Platform. To see what our platform offers, you can visit our page or get more information by booking a meeting with an expert by filling out the form on the Contact page.