What are the benefits of open banking?

Open banking puts you and your business in control of how you manage your money. The technology and regulatory framework allow financial data to be shared quickly, safely and securely, opening up new opportunities and financial products.

The opportunities of open banking

Open banking works on an API (application programming interface) platform that allows authorised providers to link their services seamlessly and securely to create an enhanced customer experience. The most obvious example of APIs in action in other sectors is the Uber booking system that overlays information on Google maps.

It’s a dynamic shift in the way in which financial data is shared and paves the way for Fintech to disrupt the market by offering a range of digital-first money management apps and services that add value for consumers.

But startups aren’t the only winners in this newly evolving open banking ecosystem. The Big 9 banks and building societies who were the first licensed users of the open banking platform have the opportunity to build on their existing trust-based relationships while collaborating to offer a new range of services.

How open banking benefits the individual

Open banking offers a range of potential benefits for the consumer. Built on the open banking API, customers control consent and authorisation much as they currently do for apps, such as Facebook. 

Once a third-party provider has been cross-checked against the FCA register or the open banking directory, consumers can fine-tune access permissions for the most secure experience. 

The wide-ranging benefits are expected to include:

While some banks already offer a similar service, new Fintech apps are expected to deliver a richer experience, allowing consumers to enjoy at-a-glance monitoring of their monthly spending. 

Individuals who use multi banking and other diverse credit options will be able to unify their incomings and outgoings through a single API-based dashboard across all their accounts. Plugins could eventually automate tasks such as money transfers to keep accounts in credit.

With open banking, any loan or credit card company will be able to access your financial data once you have granted permission. By breaking the bank’s monopoly on lending, the consumer will have access to a broader range of products based on more accurate credit scoring for cheaper loans.

Consumers who currently enjoy this type of functionality will appreciate the superior experience delivered by dedicated apps, dashboards and plugins. The combination of financial products and open customer data could provide a more straightforward assessment of complex financial products.

What are the benefits for SMEs?

Currently, open banking is targeted at individual customers and SMEs. Initiatives such as 2017s Open Up Challenge gave Fintech providers and startups access to a data sandbox of anonymised data. Winning apps included Budm, an account aggregator, and iwoca, an alternative lending app.

Open banking will present clear pathways to improved choice and financial opportunities by delivering better insights and more knowledge for SMEs:

The sophisticated ecosystem of authorised third-party providers that are appearing on the open banking platform is designed to provide better financial management for your SME. Your business can access products designed to be directly responsive to your needs which could prove a pivotal transformation in the way in which SMEs manage their finances

In the same way that open banking opens up more lending options for individuals, the ability to check credit and have your business credit checked quickly and easily opens up new opportunities for loans and lending. Credit checks become automated with a few simple permissions.

Real-time account visibility gives SMEs greater control over cash flow and allows for a streamlined payment structure. Businesses could benefit from better analytics for late payment management plus better forecasting reports to manage cash flow data.

Access to market sector-specific data delivers personalised services to SMEs that respond directly to your business needs. Staying on top of the latest Fintech innovations gives SMEs access to the latest personalised products to enhance productivity and make your money work harder and smarter

What’s next for open banking?

Open banking has the potential to put you in the driving seat by taking control of your data sharing permissions at the micro-level. APIs have already radically altered the transportation landscape and have the opportunity to influence services across the data-driven economy.

There are a wealth of opportunities offered by open banking for consumers and SMEs. However, regulatory bodies, Fintech and established financial institutions share a huge responsibility in this rapidly evolving environment. If SMEs are to take full advantage of open banking to control their financial management as never before, education and authenticity must be embedded into every development and innovation.

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