Open banking lets you manage your budgets & expenses via the new age FinTech apps. How safe is open banking? What are the benefits for you? Here’s answers for some of your questions.
Open banking concept allows traditional banks to share your transactional data (via set of APIs) to external third parties with your permission. Remember that you always has the right & control over sharing of data and you don’t have to share the data if you don’t want to avail the services provided by these FinTech apps such as Money Dashboard, Yolt etc.
77% of banks in Europe plan to invest in open banking initiatives for their commercial customers according to Accenture report.
What banks are doing in open banking?
Banks are opening up their systems to provide access to third parties or FinTechs to consume your financial transaction data such as how much you have spent, where you have spent & when.
All these accesses helps third-party or FinTech apps to consolidate your financial transaction data, categories them and generate human understandable reports.
Why do you need open banking?
- Consolidated view of your financial transactions: All of us today have more than one bank accounts & cards. Sometimes (most of the times!), it’s a nightmare to check your transactions and understand where you are spending & on what. Open banking allows FinTech apps to consolidate all your bank accounts & cards (if you grant the access), and provide one single view which people like you & I can understand.
- Track your budgets & expenses: Think of a scenario where you wanted to spend 10% of your salary to buy beer, but realise that more than 30% is spent on beer from few of your credit cards (good for you, but not for your pocket!). You can also set monthly or yearly targets on your expenses and let the apps track & manage against them. How cool is that!
As per EY, 94% of FinTechs are considering how open banking can enhance their current services.
Is your data safe?
Open banking works only if you want it to work, which means you would have to provide access to the third party or FinTech apps to access your transactional data. Anytime, you can terminate the access and ask the Fintech app to remove your data. Also, regulators & data privacy laws across the world restricts the misuse of your financial data by setting rules/guidelines. So your data is safe!
UK open banking consumers have doubled since January 2020. Source: Business Insider
While traditional banks are slowly adopting to open banking, new age banks are pushing this ahead with full steam. FinTech apps have proven the value of providing such data, however, we are still far away from ‘truly open banking’ experience.
Traditional banks needs to open-up to provide more support for open banking and also embed open banking in their digital experience. Combination of artificial intelligence & machine learning will lead to wonders. We have a long way to go, this is just the beginning!