A new and developing standard in consumer banking is open banking. Today, in this post, Julio Herrera Velutini, Britannia Financial Services founder, will explain Open banking and how it impacts the future of financial services. So, without any delay, let’s get to the point now.

Open banking is the practice of granting third-party service providers access to consumer banking via the use of application programming interfaces (APIs). This offers free access to financial data from banks and NBFCs, including banking transactions. This makes it possible for customers, financial institutions, and outside service providers to network their accounts and share customer information. Customers must give permission for the bank to access their data with third-party service providers under strict compliance guidelines.

The third-party APIs use the shared customer data to compare current and past transactions to a variety of financial service possibilities. By combining shared consumer data made available to third-party APIs, new market trends and rules are developed. Instead of data centralization, this permits secure client data sharing with different financial organizations. The usage of networks opens up a variety of different economic prospects for the market participants, and customers have more alternatives and information when choosing which products and services to purchase.

The benefits of Open Banking

The APIs can now analyze a customer's past transactions to determine their needs and present them with the best financial goods and services. The transaction data and character of the client may be examined by the APIs in order to provide suggestions about what would be more suitable for them. For instance, recommend a better savings account for earning a greater rate of interest, a better mutual fund for reaping a high rate of return and one that is safer, or a better credit card with a lower interest rate. The house loan slab and interest rate that clients can afford to pay can also be suggested through Open Banking.

Thus, Open Banking aids in lowering the amount of financial risk for both customers and financial organizations. In the Julio Herrea Guide to Financial services, he clearly mentioned that open banking aids in the early detection of issues so that the proper steps may be taken to reduce financial risks. With the development of improved technology, Open Banking leads in cheaper costs for small and emerging banks and better client service. Because of this, banks are able to better manage their client relationships and increase customer retention.