Open banking and the cost of living crisis: the key to financial wellbeing

Inflation, energy crisis, lay-offs, recession – these are all words that, unfortunately, are becoming more common for the average person. There is no other way around it, we are living in times of trouble. 

It is fair to say, however, that hardships don’t last forever. And with the help of the right tools, we can rise above them and come out stronger and more resilient. The post-COVID scenario is far from what we expected, and the average consumer is struggling to make ends meet.

But there is hope, and its name is open banking. Luckily, this concept is evolving and fulfilling its own promise: helping people achieve their full financial potential. It's also a powerful tool for achieving something absolutely vital: financial resilience and wellbeing.

Only a few years ago, the term open banking was mainly associated with banking as we knew it. Today, when we hear “open banking” we think of innovation, better financial products and services, and financial literacy.

Open banking does not exist exclusively to allow for more competition in the financial market, levelling the playing field between traditional banking and FinTechs. 

How can open banking help with the cost of living crisis?

Open banking will not end the cost of living crisis, but it can definitely help soften the blow.

With more data, comes great responsibility. By resorting to the latest technology to gather and refine banking information, open banking can give consumers access to a complete overview of their financial situation. 

Personal Finance Management (PFM) applications

Accounts from several banks can be gathered in one single application, providing clear insights about income and spending. Not only that, but imagine how convenient it would be to have this data update almost in real-time, through the intuitive interfaces that are the hallmark of a great Personal Finance Management (PFM) app?

Better yet, imagine being notified about the best deals, instead of having to look them up on flyers – instantly saving money that can be better spent elsewhere.

Here are some of the things PFM apps can offer:

• Overall view of your financial situation in one single place

• Budgeting

• Expense tracking

• Complete insights, from income to expenses

Open banking can assist us in managing our daily routines, helping save money that perhaps is being poorly spent, and channelling it to key areas that the user can prioritise according to his specific needs. 

Open banking loans

With the consumer’s consent, open banking also makes it faster and easier to get a loan and jumpstart that business you’ve been dreaming about. There is some merit to those who think that times like these favour the brave. The risk may be high, but the rewards can be even greater. 

The lending process is also fairer, due to factors like:

• Better data acquisition

• Real-time income verification 

• Improved invoice settlement

• Safer procedures, less prone to mistakes

All of this has a great impact on peoples’ lives, but also on a sustainable economy that understands effective lending as a powerful ally.

Open data and open economy

Open data is perhaps the key to an open economy, where all these benefits can transcend to other pillars of our lives. If we consider the possibilities for education, healthcare, or even social media, we easily realise they are countless. 

It’s all about empowering consumers to use their data to their advantage. This is true for money and finance, as demonstrated by wealth tech, but also to other aspects of our day-to-day lives. 

Both consumers and businesses are now beginning to understand the full potential of open banking. It’s just a matter of unleashing it so that we can overcome this adversity and come out stronger, empowered and financially free. 

What can FinTechs do to help overcome this cost of living crisis?

What FinTechs bring to the market is a new way of looking at problems, and creative solutions to deal with them. 

Especially in times of distress, like the ones we are living in now, financial management is of the utmost importance. And businesses that develop financial technology can serve as monitoring platforms that help consumers to keep an eye on things, especially their spending habits. 

Those are also crucial to keep an eye on debt, as credit can prove useful but can also spiral into misuse. Speaking of credit, open banking-enabled solutions can definitely help you find which credit better suits your specific needs. 

But if open banking is considered by many the future of FinTech, there is much more to do. There are still infinite products that can be developed to help consumers, especially in hard times. 

Better products and services may be the end goal, but there is no denying that ideally, FinTechs should play a role in promoting financial literacy. The more conscious people are about money, the better they understand its implications not only for the present, but especially to their future overall wellbeing. 

Companies must make an effort to continuously invest in educating and engaging people and other industry stakeholders on the value of open banking and data sharing. After all, there is no company if there are no customers.