How can Open Banking be Useful for Banking Customers?

A bank account is essential for any individual as it holds their money and helps them to make financial transactions. However, with the introduction of newer technologies, third party companies are accessing the financial data from the banks to create more value-added service for its customers. Open Banking is a practice that allows the bank to share the account information of their customer with third parties to benefit the customer.

The data is only shared after the approval from the banking customer. These data-sharing techniques help the bank to create better services for its customers based on the data and their preferences. The data can be used to identify the current spending and saving trends of the customers to provide them with better investment options.

In Open Banking, the data of the customers is shared over an electronic medium. Open Banking API allows the third party to analyze this data to promote the development of new finance and banking applications. The data can also be used to create new services and improve the existing banking experience of the customer. For example, this data allows a bank to understand how their customers are using their mobile application for the transaction.

Accordingly, they can make changes to the application to improve the UI and functioning. Third-party companies often use the same data to create apps and services that can help the customers to different types of transactions like borrow, pay, or save.

The most common example for the same is mobile banking applications, which provide the customer to save money, pay bills, invest money, get a loan, and subscribe to various other services, etc. Another popular example is a financial application like Mint and other investment applications that allows a user to invest in shares, stocks, bonds, etc. through the mobile app.

Importance of open banking:

Open banking is a big deal for third parties, as well as the bank. It is the only way apart from direct customer feedback that can help a startup to create the perfect application and service. It also helps the bank to develop better and new facilities for the customers. Open banking eventually gives customers more options to manage their money and increase its value. Let’s have a look at how Open Banking adds value for the customer and why it is essential.

The pressure to improve the services is one of the major factors due to which the Open Banking environment is critical. Opening up the database and information to the third party allows them to create new applications through which customers can manage their money. The market for third party financial applications is already on a boom with new applications being offered every day.

Due to this banking sector is already in the pressure to provide similar services on its website and mobile app. It makes them understand the customer’s requirements and upgrade their online services. As an example, adding multiple investment options, bill pay, subscriptions, and other services to one banking mobile app platform has been recently opted by many banks.

Open Banking opens up the competition for third party and banking sectors to attract more customers on their mobile app for financial management. 

Automated Process is another benefit that has made open banking famous for consumers. Due to open banking, data of customers was shared with third parties, leading to the development of multiple applications and integration with the bank.

The integration of these third-party apps with Open Banking APIs has led to the automation of bookkeeping. Booking keeping has been one of the most cost-sensitive issues for banks and consumers.

However, with open banking and integration of apps, a customer can make a transaction from any third-party application, and the same is immediately reflected in the bank account. These transactions work in realtime and are easier to maintain the account records.

More payment methods is another excellent advantage of Open banking. Since multiple third-party apps have integrated with the bank, the customer can use these to make the payment without visiting the bank website and mobile application.

A great example of the same is Paypal, which allows users to accept and send payment through a third-party app like PayPal with going to the bank’s platform. Similarly, many new payment apps have been launched that can directly help the customer to send and receive money.

Preventing fraud and increasing transactions is an essential factor that Open Banking brings into banking. Since Open Banking shares customer information to create a new platform for financial management, it allows the user to increase his or her banking activity.

Having multiple applications connected to the banking server helps to increase the transaction of an account since it becomes easier and faster for the customer. It ultimately leads to more digital revenue and also becomes more convenient for the customer to interact with the bank.

Similarly, the increase in the use of AI in these apps can prevent and detect any fraud logins and transactions and block them in real-time. It is continually improving from the last few years and has now secured the digital account from any such activity.

Overall Thoughts

Open Banking is one of the most innovative steps that the baking sector has taken to increase the scope of banking for customers. It not only improves and enhances the financial engagement of customers through banking and third-party platforms but also builds a new revenue channel for these sectors.

Open banking is the way forward to bringing innovative technologies and market competition to this sector, which motivates all to improve and add new features to their financial platform. Competitive advantage is just one of the highlights of Open Banking, as it also brings in more interaction of the customer with the bank and also increases the digital revenue.

Open Banking is making the financial network wider and open to new experiences. This approach promotes a decentralized approach where the opportunities with data can be limitless.

Open Banking has not yet approached its limits. It is just in a phase that has started to explore the world of opportunities with banking data and innovative technologies that can change the way finances are being managed.

Open banking opens up the financial institution to a global economy and helps to participate in them.