Open Banking has become a buzzword as of late. Many organizations are talking about it, but what exactly is all the fuss about? To put it briefly; open banking technology is all about sharing consumer’s financial information. It’s something that’s come into effect over the last few months thanks to a change in laws in the UK banking industry. The aim is to create a more open market where banks aren’t the only people that have access to financial info.
Don’t worry if this doesn’t make a lot of sense right now, as we’ll dive deeper into things in this post. Hopefully, we can simplify everything so you understand what open banking technology is and why it’s important to keep an eye on it.
Open Banking Explained
Open banking is a new ruling that’s changed the way banks handle financial information. Essentially, it means banks can no longer hold onto all of your important financial data. This includes things like spending habits, direct debits, and so on. Why would anyone want to share this data? Because you can now share it with other providers that aren’t your bank. This could be a third-party organization that offers an app to help control your spending, or it may even be a rival bank.
The key here is that permission is needed for this data to be shared. So, banks can’t go around sharing data if they don’t have the consent of the consumer.
Why is this even a thing? The idea is that open banking should help drive a more competitive and creative financial market. Banks will no longer have sole control over financial data, which opens the door for new companies to spawn and take advantage of open banking to develop new services that benefit the consumer. A simple example of this would be a new app that accesses your financial data and figures out how much you spend on food every month. As a result, it provides you with results on how you can reduce your spending by going to different supermarkets.
Why Should Businesses Care About Open Banking?
While open banking is currently in operation over in the UK, that doesn’t mean it won’t come here anytime soon. So, businesses here need to be wary of what might be on our shores – if it’s deemed successful in the UK.
This means companies should start thinking of ways in which they can call upon open banking technology to improve their own services and tap into new markets. We’ve already given an example of how an app can now access financial data and use it to provide a great service. This opens the door to many new business opportunities that are waiting around the corner.
Open Banking: A Final Summary
To summarize; open banking technology is this new idea that banks no longer have a stranglehold on financial data. Third-party organizations can now gain access to this information – with the consent of the consumer – and utilize it as part of their service. It’s an intriguing idea that’s very fresh and currently only in operation in the UK. If things prove to be successful, we could see open banking in the US in the near future.