This new expression describes banks sharing certain data of their customers with other actors of the financial world under certain conditions but also non-personal data relating to the banks themselves (ex: locations agencies, services provided etc.). The very principle of an open banking system suggests apprehensions as the notions of security and protection until then provided the "guarantee" of a well-kept money.
In fact, Open Banking is not that new. This concept first appeared in 2013 in the Second European Payment Services Directive (PSD2) and has become an obligation for banks since January 2018. It promises many technological advances in the financial sector which is moreover very favorable to the emergence of. From now on, customer data can be shared by banks with third parties in order to better understand consumption habits (eg savings, etc.). The sharing of this information framed by the GDPR law, obliges banks to be more transparent about the use of this information as well as about the commercial transactions carried out with this data, while of course requiring the prior consent of individuals.
The obligation for banks to provide API (Application Programming Interface) connectors from September 2019 is also at the heart of this model. This technological and ideological advance allows third-party developers to offer innovative applications and services to the world of finance by connecting their solutions to existing databases, creating new interactions and new synergies.
Open banking, but why and for whom?
The digitization of financial services has pushed banks to develop ever more new products and services by relying on the explosion of new technologies and above all by relying on the expertise of new, more flexible and more efficient players. This sudden and unavoidable modernization invites banking establishments to make their customers' data accessible with third parties capable of providing these new advanced services. A colossal additional income potential therefore counterbalances the risk of opening its doors to young shoots.
The opening up of information systems is a real revolution, as data sharing has been compartmentalized and opaque until now. This openness obliges banks to offer extra-financial services also called "beyond banking"; the goal being to offer a relevant service when the customer needs it and to position themselves upstream and downstream of this need, to anticipate and satisfy it.
The collection of information coupled with the responsiveness of fintechs to offer ever more innovative services to their customers aim to improve relations between consumers and their banks. The massive use of collected data (Big Data) promotes a better user experience and above all offers products and services adapted to everyone's needs (eg: investments, coaching, etc.), personalized banking becomes even more concrete.
As you can see, Open Banking represents the future of the banking sector because thanks to new technologies and data sharing, financial players will be able to anticipate and offer better services to their customers. Today, nearly 90% of banks say they plan to become "Open Banks" by 2021!
Yes, users' reluctance to secure data remains legitimate, because Open Banking also opens up the system to potential new security risks, new loopholes and above all new temptations. But if new technologies improve the customer experience, they will also undoubtedly bring new weapons against cybercrime. The law also more and more attentive to the use of personal data will be an unprecedented restrictive weapon and the customer will remain a winner. New uses will fundamentally transform the way of thinking of traditional players.
Let’s be open(minded)!
The E-Pay Space team