What is open banking and what can you use it for?
Open banking. You might have come across the term several times, but what does it actually mean and what can you use it for? And why exactly is open banking relevant for both businesses and consumers?
To explain why everyone should know about open banking, we’ve created an easy-read guide that explains it all.
A world of more valuable services
Put simply, open banking is about opening up the financial sector and allowing all businesses to build user-driven services with access to financial data. Traditionally, banks and financial institutions held all their customers’ financial data. But now, all businesses are able to use financial data to create unique and personalised products and services.
What’s more, open banking not only allows businesses to offer better services, it also empowers consumers to assume full ownership of their financial data, as they now have the choice to decide what services they would like to share their financial data with to get more convenient services. Without the explicit consent of the consumers, open banking wouldn’t exist.
With open banking, it’s no longer up to the banks to decide what your financial data should be used for – and that creates a whole new level of competition, which results in better products and services on the market.
Automation, convenience and personalisation
There’s no doubt that data is a digital fuel in our time. By opening up for all businesses from different industries to use financial data, open banking ensures that all businesses have the same opportunity to create automated, convenient and personalised services – no matter what industry they operate in.
Let’s say you're an accounting system provider and you want to automate the workflow for your users. Instead of having your users manually download data sets from the online bank, open banking enables you to show your users their financial data directly in your service, so they can truly automate time-consuming tasks, such as bank reconciliation.
But that’s not all. From user-driven PFM apps to accurate credit-scoring models and automated accounting solutions, the use cases open banking can help define are practically endless. Businesses from many different industries, including the ones below, can also leverage open banking to create better services for consumers and other businesses:
- Asset or property management
- Insurance companies
- Law firms
- Utility companies
- Retail and e-commerce
- Car sharing and bike sharing services
Fairer and smoother payments with open banking
Open banking isn’t only about being able to use financial data to create better services. Open banking also means you can integrate seamless account-to-account payments directly into your product. That means everyone with a bank account can pay and accept payments at the fraction of the price of a credit card payment, explains our CEO and Founder, Rune Mai:
“When you press pay in a webshop, normally a payment window will appear, where you select a credit card type and enter 16 digits. With the open banking solution, an interface appears, where you select your bank, log in to your online banking, select an account, receive a receipt and then return to the webshop. So you don’t have to enter any information, but rather log on to your online banking as you usually do.”
But open banking payments are not only for e-commerce sites. Accounting system providers, insurance companies, loyalty programmes, pension funds and many more industries can also benefit from the opportunities that open banking has to offer.
Want to know about how your business can take advantage of open banking? Drop us a line and we’ll show you how.