Open Banking is a new approach applied to financial data. It will give consumers the ability to securely share their banking activity across multiple providers through Application Programming Interface (API) technology. Open APIs are expanding the possibilities of how banks and fintech companies collaborate beyond Open Banking, but for the time being, let’s focus on open banking meaning and analyze whether it is the real deal for the future of financial management, or is it just something temporary that will fade away rather quickly?
Why should you trust open banking?
What is Open Data? Open Data has been defined as data that can be freely used, reused, and redistributed by anyone with the right privileges/rights. Open data is available for use for any purpose, commercial or non-commercial, without restriction. There are a lot of benefits in sharing this data, such as better analytics, more insightful suggestions, AI recommendations, etc.
However, when it comes to financial information, rarely you can expect to find a person that might be willing to openly disclose that info. There are a lot of risks. Hence, open banking regulations focus on very heavily regulated use of open banking data, only allowing access to it after carefully licensing certified 3rd parties to access, collect and/or manage said data. You can read more about the meaning of open banking here – https://nordigen.com/en/open-banking/meaning/.
PSD2 and the technical regulations surrounding this directive are focused on open banking being safe and only allowing the providers to access your data once you expressed your consent and authorized it. Hence, you have the opportunity to use these services whenever you want and need them, with all of the security in the world.
How open banking works?
Open banking meaning is focused on making the banking sector more accessible to newcomers and technologically innovative startups. Open banking is centered around Application programming interface (API, for short) technology.
Open API infrastructure enables new services to appear in the market. Open Banking allows you to share your financial information with third-party applications, which can then provide detailed insights into where and how you spend your money, compare offers for you, gather analytics, insights etc.
There are currently numerous service providers in this sector, displaying the benefits of Open Banking APIs. This is the open banking meaning to people around the world – benefits for themselves and a consumer-oriented approach that favors them.
Where is open banking implemented?
Open banking is being implemented in Europe, with its Open Banking Standard (PSD2), which requires banks to share their data through APIs. Open API is the key technology that enables Open Banking. When you hear Open Banking technology and its meaning, think API.
Open Banking allows EU consumers to benefit from innovative financial services based on aggregated and anonymized data straight from their bank account.
Open Banking requires every major European bank in Europe to provide Open APIs to 3rd party providers, who have been authorized/licensed by the Open Banking platform. Then this data could be used for tenant authentication, income verification, making and initiating payments, tracking spending, etc.
It seems that Open Banking is a growing tendency in the financial sector. In fact, there are companies worldwide that are working under this model and delivering great results for their clients. For the time being, the EU, the UK, some African, Asian countries, and Australia are the innovation leaders at this point.
Since Open Banking is Open API-centered, it has the potential to be used worldwide and offer major benefits for users. Open API technology can be used in other areas than finance – Open Data offers many opportunities in different industries, such as engineering, healthcare etc. Open API eases business relations between not just individuals and companies but also between companies themselves. It can boost technological progress and economic growth around the globe.