Last editedMay 20233 min read
When it comes to faster and safer banking products and services, open banking largely increases the amount of new possibilities, both for customers and businesses.
However, there is still little education on this topic, which may lead to some scepticism and concerns on the consumer side. In this blog post, we will delve into this matter and pinpoint all the advantages this type of service has to offer.
What is open banking?
The term refers to a financial practice where banks and third-party financial service providers are securely supplied with relevant information regarding transactions and other consumer data.
This is achieved through the use of APIs (application programming interfaces), and it requires customer consent for the sharing to take place. This is particularly important, as it gives them control over what data they share and whom they share it with.
Overall,open banking’s purpose is to improve financial services and bring innovative solutions to the market. But what can it really bring to the table?
1. Streamlined payments
Modern, fast-paced living demands speedy payments. One of the ways open banking makes this possible is with GoCardless’s Instant Bank Pay feature.
Instant Bank Pay is a simple and convenient way to collect one-off payments, directly from your customers’ bank accounts — enabling faster payments, reducing the risk of fraud and minimising fees.
Using GoCardless’s Instant Bank Pay also allows you to spend less time chasing one-off payments and provide a smoother customer experience.
Data security is one of the main concerns within the digital sector, especially over the last few years. Open banking is no different, and this practice is as secure as your online bank.
Traditional banks have implemented additional safety layers to their technology, such as SCA (Strong Customer Authentication), which require two-step authorisation. APIs also provide an extra barrier for fraudsters, by encrypting data and securely transferring information.
GoCardless uses official PSD2-regulated APIs for bank connections. This prevents data breaches and ensures all mechanisms work securely and reliably. Additionally, all actions require consent from customers.
3. A tailored approach
Open banking allows for a great deal of customisation, making for endless possibilities when it comes to financial services.
Through open banking, digital platforms are able to consensually collect customer data to deliver hyper-personalised experiences.
Banking services and product users call for a tailored approach. Customers have, time and time again, expressed a need for customised products and services that meet their specific needs — and that is exactly what open banking delivers.
4. More choices
The emergence of open banking has allowed more entrepreneurs and startups to enter the financial market, without being limited to the traditional financial infrastructure.
Removing previously existing restrictions enables healthy competition to bloom within the sector. Open banking regulations level the playing field, and pave the way to an ever-growing variety of new products and services.
Ultimately, this benefits the customer, who can now choose from a wider array of solutions that better solve their problems.
5. Speed and automation
Sharing account and transaction data across all your finance platforms help streamline processes, ultimately benefiting the customer.
The data that’s being shared provides an accurate and detailed financial history. When securely shared with loan, credit, and mortgage officers, it can help automate and speed up the application process.
6. One-stop solution
One of the greatest benefits of open banking is the ability to access all your financial services in one place.
Mobile applications and digital services can now provide customers with the option to connect to all their bank accounts and payment systems through one single app.
This saves time and provides customers with greater control over what's happening in all their accounts, at all times.
7. 100% online banking
Even before the trying times of the COVID-19 pandemic, visiting brick and mortar banks for any of your financial needs wasn’t really optimal.
Open banking simplifies this equation, allowing users to opt instead for a fully digital experience. With online platforms growing in every business sector, customers expect the same from their financial solutions.
Any players that are able to improve their online offerings will more successfully establish themselves within the market.
While for some having to visit a physical bank is simply undesirable, for others it might pose a more serious challenge.
People living in remote areas, individuals with disabilities, and those travelling outside the country have all faced the issue of inaccessibility to their financial services.
Open banking can help boil this down to one question: is technology available to you? If the answer is yes, then your financial platforms can be accessed remotely, providing you with more freedom and control, at all times.
9. Traditional banking meets modern solutions
Banks and FinTechs don’t necessarily need to be in competition with each other. Instead, open banking allows all players to connect their infrastructure to not only co-exist, but collaborate to create new, innovative solutions and services for customers.
This provides more room for growth and development in the financial sector, and ensures that more business and client needs will be met down the line.
10. The customer is king
The customer is central to the practice of open banking. A streamlined approach, ease of use, accessibility, speed, and a more tailored experience are all benefits of open banking.
As long as open banking keeps developing, collaboration and competition within the market will continue to deliver and evolve customer-focused services. This makes the process easier and more efficient for the end user.