Apr 17, 2022
 in 
Banking

What is Open Banking & How It Works?

O

pen banking and open source software go hand in hand because an open-source application that is properly implemented on a bank's website can bring real-time financial information to its users, in real-time, every hour of every day. The ease of utilization, especially for new users, is what has led more people to rely on open source applications over more proprietary ones. This is also the case with open-source software and open banking.

Open Banking: All-Explained

Open banking is synonymous to open bank data that is considered robust and mature. This is why these banks continue to use open-source application programming interfaces (API). They have an expert team of programmers working on the project day in and day out to ensure that their APIs are working at all times. In addition, open-source application service providers, also known as open-source subscription services, do not charge their clients for any upgrades or changes to the open-source application, so the cost for an open-source application is very minimal.

Before using an open banking API, one should make sure that the application is developed and maintained in a way that meets the requirements of the specific bank. This is especially important for online banking, where there may be a need to customize features or handle various types of transactions. While open source applications provide a stable, convenient way to perform banking functions, it is still important for people to exercise caution when using such applications because although they are free, they can also be very risky.

Some of the advantages of what is open banking include:

  • Easy accessibility to your funds.
  • The flexibility of service.
  • Greater choices in investments and options.
  • Direct access to your money.

What is Open Banking, Then, for Consumers?

For consumers, it is an ideal option if they are looking for a bank account without the hassle of a credit check, extensive paperwork, or lengthy application process. It is also favored by investors and other consumers interested in protecting their assets from theft or fraud. For service providers, it is an excellent choice because it enables them to provide their consumers with an easy-to-use banking product while gaining market access and potential for new business. And for service providers, it provides them with an easy way to increase their customer base and draw in more clients.

What is the Purpose of Open Banking?

Open Banking is the sharing of your customer information between multiple parties in order to facilitate economic activity in a way that maximizes the potential of human capital and promotes economic growth. Open Banking offers financial institutions the ability to harness our digital resources to help drive economic growth. And it's about time; digitalization and automation have been a key component in every major technological breakthrough over the past decade. That's why Open banking is one way to bring advancements to life in the world of finance.

Endnotes

Open banking represents the next step in the digitalization rise, and it represents the opportunity to realize the full potential of human capital. In other words, it represents the next stage in the relentless march of software and technology in our financial markets. It showcases a crucial new phase in the ongoing evolution of financial markets, which will impact markets worldwide.

Written by : Farooq J. Khalil

Account Manager, Ottu