As data sharing increases, the development of the global open banking system is setting the outline for security and consumer protection. With the changes in EU finance guidelines, the (OBWG) Open Banking Working Group, which was established in United Kingdome in late 2015, to not only fulfill the standards set by the government but to discover how to push banking into the present era further. Opening doors for new banking models that will help the customers to manage, borrow, save, invest, and lend their money in better, safer ways as compared to before.
What is Open Banking and How It works?
In these recent years, the United Kingdome banking has taken many significant steps towards improving their customer service and satisfaction by minimizing cost for customers while reassuring fair bank competition. The present Account Switch Service, which is also known as the Seven-Day Switch service, was introduced in the year 2013, to help encourage customers to change their providers by comparing their services with each other. This idea didn’t work out as they planned, as only two percent of banking customers were able to take advantage of this. Identifying that a lot more needs to be done, Open Banking is a more complete/ broad plan that provides its patrons with even superior control over their financials. In the open banking system, data will be transferred over protected APIs so that client can manage their finances more effectively. This will allow the 3rd party developers to create helpful tools that a person can efficiently utilize.
Most medium and small size enterprises and businesses are using commercial software system for their bookkeeping purposes. Still, these enterprises have to manage a big part of their business data physically. Working with API banking service providers will allow clients and businesses to manage all of their banking data in real-time. It will also provide them with precise and up to date info regarding the finance market.
This will allow a customer to save and compare their accounts with each other’s and will be able to use modified resources for making better banking-related decisions. It will also allow customers to improved loan terms as 3rd-party lenders. An attempt of such kind will take years to apply. According to the recent news, the Open Banking system is set to be fully implemented by the end of 2019.
Open Banking in Other Markets
The use of APIs is an effective cost sufficient system that is becoming increasingly common by banks all across the world. Advanced banking actions taken by the United Kingdom government shows the dedication and commitment they have towards their country and financial market. For example, the Open Banking system has been extremely successful in Germany since 2010. It is now working with the majority of German banks to produce an environment that supports 3rd-party claims for clients.
Open Banking in The United States
In the United States, financial companies such as Mint founded the idea of free financial applications. This idea combined many bank accounts and credit cards to offer their customers a broader financial view along with the ability to compare numerous banking products with each other to see which is better.
Some banks of the United States, like J.P. Morgan, have become uncertain about the sharing of banking data for reasons that include data overloading servers. However, but their unwillingness to collaborate with the banking community can also be a well-planned strategic move. The implementation of the Open Banking system will help lessen such problems and recover teamwork along with reestablishing fair competition among the banking industry.
Open Banking as the Footing for Future Growth
The Open Banking system is reinforcing technology in the modern-day financing system and is a huge footstep a brighter future for both banks and customers. The system will encourage fair competition between financial service providers, secure data sharing, and providing customers with options that will help them manage their finances better.
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