Open Banking - An Innovation in technology, changing the game for consumer, fintech and financial institution

 

What Open Banking actually means?

The Open Banking is an environment created to empower consumers to access, use, and benefit from their financial data. Therefore, it reveals the potential of financial data for the benefit of all.

There are numerous ways to interpret the concept of open banking depending on markets and regions.

Companies have experienced the power of using big data for business intelligence. Critical business decisions are made based on the data. Therefore, it is time for individuals like us and small scale firms to unlock the potential and empower us to get the most out of our own financial data.

Open banking platforms empowers us through third-party platforms and apps to utilize the data for our benefit. However, the consumer has a full control of their financial data and hence they have to provide explicit consent to authorize the data access between third-party platform and financial institution. This step is usually referred to as “Consent” or “Permissioning”.

By doing so, the consumer allows the third party to access the required data and utilize the same to the requirements of the financial institution such as loan approvals, issuance of an insurance policy, investments etc.

There are multiple parties in the ecosystem like third party apps and platforms, financial institutions and the consumer who owns the data. Open banking gives the power to consumer to control access to that data. Data security here is one of the ultimate building blocks of open banking. Therefore, one of such method with the highest control and security level is widely known as “Tokenization” also known as “oAuth” or “Open Authorization” connections to enable the third party to connect with the consumer.

The consumer at given point in time can revoke their consent/ permission/ authorization and the third party will not have any access to their data. As said, consumer now is the master of their own data.

Why open banking is needed?

Given the world we are living in now, consumers have their data scattered in silos across the web world. For example, social media, payment apps, e-commerce, delivery apps etc. Hence, the consumers are uncertain and have no control on what is happening with their data.

Open banking provides the consumer with digital experience to engage and have the control of their data. It also gives them more financial opportunity to possibilities.

What are the benefits?

Consumer Experience – it streamlines financial experiences by simplifying how they engage with their financial data for example peer to peer payments, personal finances, less or no paper work for the financial institutions. Hence, providing a seamless end to end digital experience to the consumer to process their financial instruments in minutes and not days or weeks.

Security and control – Consumers have the full control of their financial data. They can provide the access to their data at their fingertips and may disable the access at any time they wish to.

New Avenues – by leveraging the power of open banking, new financial apps and platforms could be designed to further penetrate into the financial inclusion space. Hence, banking the un-banked and much more.

Financial Literacy – Better financial decisions could be made by the consumers with open banking. Better understanding of their finances enables consumers to improve their financial literacy.