Tremendous change is underway in the world of finance, with new technologies making it possible to do business in entirely different ways. A whole slew of new terms has come to prominence over the last few years, with Open Banking being among the most common. But what exactly is an open banking platform, and how can it benefit the consumer?
What is Open Banking?
Open Banking is made possible by a whole range of technologies and practices. It basically means that third party organisations are given access to data previously kept private by the bank. This makes all kinds of loaning and digital wallet services possible. Through technologies like blockchain, customers are able to retain control of their data, while still reaping the benefits of this open approach. But what exactly are these benefits?
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Among the implications of open banking is that customers are no longer required to constantly visit the bank. This has proven especially useful during the recent coronavirus pandemic, but it’s a benefit more broadly. If all you need to access your banking is a mobile phone, then you might plausibly do it from anywhere in the world – which is great for those who live in remote locations.
The increased accessibility also helps those who may otherwise struggle to make it into a physical bank, such as the elderly or disabled, bank in a way that is convenient and comfortable for them as they can remain at home and use technological aids if needed.
Banking as a platform allows a whole variety of different services, provided by different organisations, can be presented as part of a single package. This makes life much easier for end users, who can deal with loans, manage accounts, and receive financial advice, all in the same location.
Banking apps are the main example of this centralisation as they allow users to access all their services in one location without having to switch between windows or apps but can instead connect their accounts and see everything in one place.
When customer data is collected, it can be leveraged to provide a bespoke service with the aid of machine-learning algorithms – or more traditional forms of automation. A given customer might be presented with different kinds of information based on their history and spending habits.
Of course, where personalisation really comes into its own is in the case of insurance products and loans, which can be tailored to the individual, thereby reducing risk for both lender and borrower. This also allows open banking services to be able to offer loans or borrowing options for customers who may otherwise be turned down by traditional banks.
Open Banking provides a means for customers to indicate the services they want to use, and for banks to act upon that information. This leads to services being developed that are more appropriate for the needs of the customer, and for customer to feel additional goodwill toward the organisations which have listened to their needs and taken steps to cater to them.