Digitalization increases its importance every day of our age. The finance sector is also trying to provide the most reliable and quality service for its users by carrying the future today by using the online world’s blessings. While the digitalization and personalization of every service used daily to become the new normal; the banking sector brings you together with revolutionary innovations by taking advantage of technology. In this article, the subject we will touch on is the concept of Open Banking; which is exactly related to this.
Open Banking is entering our lives as one of the biggest steps towards digitalization in the finance sector. Let’s take a closer look at the concept of Open Banking. Which will change the banking sector and carry tomorrow into today!
What is Open Banking?
Open banking, also known as Open Bank Data, is a reliable service model where your financial data is shared with third-party organizations. This is produced to offer better banking and finance opportunities.
In an age where data is everything, it is the driving force of reliability and innovation. Simultaneously, in this system, where data sharing takes place entirely with the user’s consent; any data bank you do not want to share with any other organization, so your privacy rights are under protection. It helps you save your time by controlling accounts’ movements in different banks.
History of Open Banking
This model, which was presented at the request of bringing an innovative touch to the UK’s banking sector. First implemented in the UK, was actually discussed and revised in the relevant institutions of the European Union in 2015. This new directive, presented as the Payment Services Directive 2 (PSD2), has laid the foundations of open banking. Created a strategy that will enable third-party institutions to access financial data and improve user experience.
In 2016, the UK Competition and Markets Agency brought together 9 major banks in the country; and initiatives licensed by the government under the Open Banking Implementation Entity (OBIE). It became the first country in the world to adopt the Open Banking model.
What are the Advantages of Open Banking?
This system brings transparency, reliability, and many innovations with it. The most important of these are APIs developed by third-party Fintech companies and banks.
Although it may seem complicated at first glance; APIs are actually one of the biggest steps to make your life and financial mobility easier. These interfaces, which are the cornerstone of that. Enable you to manage all your financial resources through a single application; by interacting with multiple finance applications, internet banking, and data banks connected to them.
These interfaces, which include innovative functions developed by third-party institutions. Apart from the first simple usage purposes that come to mind, such as sending money. In other words, viewing the movements of different accounts at the same time. Also, allow non-bank organizations to access your data; providing you with suitable opportunities and introducing you to services that can meet your needs.
Importance of Open Banking
In today’s world, the importance of data is increasing day by day. Banking data is valuable data that will enable consumers and businesses to understand their money spending. And also saving habits and borrowing styles and using in the most efficient way for users. Open banking allows third-party services to collect data from multiple financial institutions and analyze users’ spending and income. Allowing them to budget better for the future. It can offer better product offerings for customers, such as a more convenient credit card or savings account; with a better interest rate, financial services. Although enable banking services such as loan application and loan approval to occur faster.
What Are the Differences Between Traditional Banking?
The average consumer has multiple bank and credit accounts. In the past, everyone had to manually compile financial information from all their accounts; whether they were a business owner or a user who wanted to control their monthly spending.
To sum up, thanks to the new opportunities offered by open banking; you can now gather and manage all your financial transactions under one roof.