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Open banking is a practice where you share your financial data with third-party companies like investment platforms, budgeting apps, or loan comparison tools. This approach has many benefits. What kind of advantages does it offer, and what does the future of open banking look like?
Table of Contents
- What is Open Banking?
- For What Purpose Is Open Banking Used?
- Why Open Banking Is the Future of FinTech
- The Great Future of Open Banking = Great User Experience
- Can Open Banking Grow Financial Inclusion? Absolutely!
What is Open Banking?
With the client’s permission, a financial institution can share data such as transactions or account balances with third-party providers. This creates opportunities for financial apps, investment platforms, or lending services to offer more tailored solutions.
Simply speaking, open banking is like a highway network that connects different financial institutions and service providers.
For What Purpose Is Open Banking Used?
An Application Programming Interface (API) can be used for multiple purposes. One example available in Poland is BLIK, which is integrated with users’ bank accounts. It allows users to easily send money transfers using a dedicated, temporary code.
The first reason why open banking is the future of fintech is its flexibility and ability to connect multiple services in one place.
Another solution? Revolut – known all around the world. Open banking enables the app to access multiple financial services. When activated, the feature allows access to data such as account information, direct debits, subscriptions, and available funds.
Why Open Banking Is the Future of FinTech
The future of open banking is flexibility and providing good experiences to users and that’s the second reason to use it. It gives the customers a wide range of services and options. It’s more convenient because there is no need to switch between multiple platforms or manually enter the data. Also, it’s easier to choose financial services which are the best fit.
The third reason is security. Is it secure? Of course. Open banking uses secure APIs and has automation protocols in case of any problems, so customer data is protected and only authorized service providers have access to the information. That’s why they can build good experiences. Personalization nowadays is something people are expecting. By using collected data, it’s possible to create personalized services and recommendations.
The Great Future of Open Banking = Great User Experience
The fourth reason is the user experience and accessibility. Jeff Bezos is one of the richest entrepreneurs on the planet because his priority was to make the user experience as good as possible. So, the future of open banking has a lot of potential ahead. How to make it happen? For instance, by getting access to different accounts through a single service. Having accounts in several banks requires switching between them. Open banking can also positively impact the quality of financial services, as it will increase competition.
Easy, cheap, and instant money movement is a game-changer. And the Revolut app already offers that. Last year, it became the number one most downloaded banking app in France and now has over 60 million personal customers globally. That’s not without reason. Transferring money in the app is as easy as sending a message.
Ease of use is one thing, but another is ease of onboarding. With open banking, users no longer have to fill in long forms or go through complicated registration processes. Sharing access to their main bank account is enough to start using a new service right away.
Can Open Banking Grow Financial Inclusion? Absolutely!
Open banking makes it easier for people who were previously excluded from the financial system, such as the unbanked or underbanked, to access basic services like accounts, payments or credit scoring. By allowing users to share data securely, even without traditional documentation, they can start building financial history, apply for microloans or use budgeting tools.
As highlighted in the Mastercard report “Purposeful and Profitable: Financial Inclusion via Open Banking Around the World”, the future of open banking is not only about innovation and competition. It is also about creating fairer and more inclusive access to financial services for everyone. The future of open banking will depend on how well it supports those who need access the most.
Sources:
https://go.mastercardservices.com/mastercard_financial_inclusion_via_open_banking_around_the_world
https://www.mastercard.com/news/perspectives/2024/open-banking-101/ https://ailleron.com/insights/open-banking-solutions/
https://www.theuxda.com/blog/open-banking-revolution-will-take-ux-to-forefront
