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What is Open Banking?

michaelbedwel10 profile image michael bedwell ・3 min read

Open banking is a step further in the digital transformation of banks. This is the option to synchronize the data that banks have about us with those of other applications that control and manage our money. Do you want to know more? Don't miss the complete information about this concept that you will find on this page.

What is open banking?

Open banking is a new banking model comparable to the birth of telephone or online banking. To do this, entities must activate a technological system through open APIs (technological links that contain information).

In this way, third-party companies can access your data and obtain information on the financial behavior of their users. To understand it more clearly, it would be, for example, synchronizing the information that a bank has about us with spending applications that we have installed to manage the budget.

Where did Open Banking come from?

In 2015, the Open Banking Working Group (OBWG) was created at the request of the UK Ministry of Finance, to create a roadmap (Open Banking Standard) on how to share financial data to improve financial transactions, provide more personalized services and create an open and competitive financial ecosystem. From then on, hundreds of providers were created that provided the service for British banking entities.

And as clients: how does Open Banking benefit me?

Mainly, that banks incorporate this technology will benefit consumers, allowing them to receive offers and information that match their profile. In other words, these applications will no longer recommend the same to all customer profiles. But will adapt the offers to the needs of each one in a personalized way.

This type of banking will give us the possibility of contracting financial products based on our needs and possibilities. In addition, we can have all the information about all the accounts, cards, and the rest of the products that we have contracted in more than one bank in a single application.

Also, if our bank has an open API, fintech companies will be more interested in collaborating with it. This means that more means of payment (such as Google Pay, Samsung Pay, or Apple Pay, for example) will probably be allowed to be used than others.

But is it safe to share my data?

Yes absolutely! Although we have said that open banking provides customer information to external companies, it will not be able to do so if we have not given the specific order that we want to share our financial information with an application.

Therefore, we must ensure before the application that we want to know our financial information so that it can show us the best options.

Open banking allows the client to own their own data and own their information. Under this approach, the processes within the financial system become more efficient, entities can start new businesses with each other and users can access decentralized services, for example, those offered by the emerging 'fintech' sector.

Thus, Open Banking encourages financial institutions to open their own technologies to generate interconnected systems, which allows them to be much more competitive and include sectors that previously could not be included.

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