Polski
Deutsch
What is open banking? It’s the practice of sharing your financial data with third-party companies. These provide digital solutions that help you enhance the performance of your employees, deliver better customer experiences, and empower the way you process data. In this article, we look at it more closely. We invite you to read on!
Table of Contents
- What Is Open Banking?
- AI & Open Banking Solutions
- The Future of Open Banking Solutions Combined with AI
- The Takeaway
What Is Open Banking?
Open banking refers to the system where you (as a financial institution) make your data accessible to third-party providers (TPPs). These may include other banks, payment organisations and fintech companies. The idea behind it is simple: the TPPs provide additional services, functionalities, or technical solutions to your customers based on the data you provide.
The data is exchanged through APIs and can be used for multiple purposes. For instance:
- BLIK—Available in Poland, BLIK enables users to pay with it (by providing a dedicated, temporary code) or to send money transfers to other people (by providing their phone numbers). Although it’s a third-party solution, it’s integrated with one’s bank account.
- Revolut—Revolut uses open banking to access multiple money apps. If the user activates this feature, all his account info, direct debits, subscriptions, and money are visible in the Revolut app.
AI & Open Banking Solutions
How do open banking solutions synergise with artificial intelligence? They are mutually beneficial.
You can achieve a lot with artificial intelligence in banking. However, to do so, you need data. Where to get it from? Exactly—other financial organisations.
- From the perspective of a TPP, open banking solutions provide the needed teaching material for their AI models to improve the security, efficiency and effectiveness of their solutions.
- From the perspective of a bank, this enables to use already existing, well-developed AI models prepared by other companies in finance.
As a result, solutions that combine open banking infrastructure and artificial intelligence are often significantly better than those developed with information acquired locally since they have more data to draw from. And a better final component is in the interest of both its providers (who can capitalise on its customers) and their receivers (who benefit from a higher-quality system).
Do you need an AI-powered component for your bank? See our Data&AI/ML solutions for finance!
The Future of Open Banking Solutions Combined with AI
While using open banking platforms and artificial intelligence proves extremely beneficial, some concerns regarding the future of this combination occur. This is mainly due to the ethics and security of such solutions.
Currently, the use of customer data and AI is already regulated, for instance, by the GDPR in the EU, while PSD2 defines the rules for implementing an open banking infrastructure. Therefore, there is a potential risk of these laws changing, modifying the extent to which AI may draw from open banking platforms. Nevertheless, it’s highly unlikely that it will be forbidden to use these two technologies together, so there’s not much to worry about.
The Takeaway
What is open banking, and how does it benefit from AI? The former is the approach to banking, where organisations may share their data with other finance companies. The latter is capable of analysing all the data provided by different banks to create much better systems. It’s a mutually beneficial synergy that takes banking to a completely new level.
Key Information on Open Banking and AI
- Core Concept: Open banking is a system that allows financial institutions to share their customer data with authorized third-party providers (TPPs), such as fintech companies, through secure Application Programming Interfaces (APIs). This enables TPPs to create new financial services and applications.
- Synergy with AI: Open banking and Artificial Intelligence (AI) have a mutually beneficial relationship. AI models require large, diverse datasets to be effective, and open banking provides the necessary financial data from a wide range of institutions.
- Benefits for Third-Party Providers (TPPs): TPPs use the data accessed through open banking to train and improve their AI models, leading to the development of more secure, efficient, and powerful financial solutions.
- Benefits for Banks: Banks can integrate these advanced, pre-trained AI models from TPPs into their own systems. This allows them to quickly adopt new technologies and offer enhanced services without having to develop the AI from scratch.
- Superior Outcomes: AI-powered solutions built on the rich data from an open banking ecosystem are generally more effective and robust than those developed using only the limited, local data of a single institution.
- Regulatory Framework: The combination of open banking and AI operates within existing legal frameworks, such as the GDPR and PSD2 directive in the European Union, which govern data security, privacy, and the rules for data sharing.
You may also read: How Banks Can Use AI to Improve Sales & Marketing
