Open banking is a system that allows customers to share their information with other institutions. This way, the user does not have to start a relationship or an account from scratch, as all data are copied.
For this, it is necessary that both institutions have efficient technologies to create a safe environment and a place where consumers have complete control over their information. This banking model has been used in Europe since 2018.
Understand the advantages of implementing this business model and how the concept of open banking impacts the financial market.
What are the advantages of open banking?
Open banking arose from the need to make the customer’s life easier. The purpose is that they have the freedom to transfer their data with less bureaucracy. However, the bank needs to have efficient technology in order to create a safe environment, as the financial institution is responsible for any user data leaks.
One of the technologies required is Application Programming Interfaces, the APIs. They are responsible for communicating with other systems. With all this organized and well structured, the advantages of open banking for customers and financial companies are great. Learn about the main ones!
Freedom and autonomy
We know that banking processes are full of bureaucracies, even when it comes to a simple bank change. The concept of open banking allows the user to share their information. This makes the migration procedure faster, more agile, and totally controlled by the customer.
As a result, consumers do not have to depend on a bank system, as their information will not be exclusively controlled. Thus, the customer will have more options for services, platforms and products, which increase their choice.
APIs are open programs, and this characteristic allows third parties to be able to create products and configurations, all safely done. This technology allows the exchange of data and the development of faster registration.
As such, no type of intermediary is required, as the APIs create an integration system. This cut considerably reduces the costs of all types of processes, as the financial resources for migrations and transactions will be decreased.
As we said, open banking allows the customer to have more choice, especially about banking products and services, and this mainly happens by reducing bureaucracy. In view of this, financial institutions need to overcome competition and make their services more attractive and efficient, and with better quality. After all, the more options the user has, the more competitive the environment between institutions is.
What is the impact of open banking on the financial market?
Open banking enables financial institutions to offer new options for services, products and transaction models. This allows the financial market to focus on the customer and their experience. This means a significant improvement in banking and financial business.
After all, who has never had problems and unforeseen issues with the bank, or had to make complaints simply because they could not complete something simple? In addition, greater user freedom and ease means time saving for institutions, and thus, they can direct their strategies and strength to the most complex and important processes.
Open banking is a concept that tends to alter a good portion of banking processes and revolutionize the experience of the customer, who will have more autonomy and control over their data. However, it is necessary to deploy efficient and secure technologies and comply with regulations that prevent improper access to user data.
Speaking of banking processes, take the opportunity to check out the 7 mistakes you can make in digital banking.