What is Open Banking?
Open Banking, an evolving concept of democratising the customer data fastened with the banks, stimulating an increased competition within the financial services market by bringing in more innovation to the quality of the products and services delivered to the customer. Open Banking relies extensively on the use of Application Programming Interfaces (API) to securely share customer data among banks, as well as allow third-party providers (TPPs, e.g, Account and Payment Aggregators) to access the bank’s technology environment to build innovative applications and services.
Accessing customer bank accounts through a single integrated platform along with open APIs play a vital role within the banking ecosystem interfacing between the banks, third-party providers (TPPs) and payment service users (PSUs). Customers with their consent can leverage the benefits of open banking by securely exposing their data to any of the trusted third-party providers to avail bespoke financial products and services.
Adapting open banking Not only from a compliance perspective, leveraging the OB as a strategic plan for banks for their growth
The Open banking wave provides a new revenue opportunity by creating improved experiences, frictionless banking journeys and customised services that help them to stay ahead of the competition by opening up the shutters for collaboration with innovative fintech firms. Banks unlock the promise of open banking by revisiting their existing customer authentication and consent management mechanism enabling the safe and secure exchange of data and services for customers. Banks adopting open banking can monetise their infrastructure by exposing different APIs to a wider range of fintech and other financial institutions that will be mutually benefitted from connecting these APIs for building their service offerings.
Integrate with TPPs to deliver customer-centric services in the competitive world
By adopting Open Banking, the TPPs (e.g., Account and Payment Aggregators) offer predominant customer-centric services with enhanced agility accelerated upon obtaining the user’s consent to access their bank accounts.
• Account Information Services (AIS) through which the bank account-related information of the user such as account holder name, account type, account balance, account statement, etc. are displayed within the TPP application.
• Payment Initiation Services (PIS) through which the users can initiate a payment to the different beneficiaries from their multiple bank accounts through the TPP’s application without accessing their dedicated online banking applications.
Open Banking in the global perspective
Open banking has already emerged in various countries having different regulations but open banking as a concept goes well beyond the regulatory environment and is applicable globally to uplift the existing landscape of the financial industry.
Countries like UAE, Saudi Arabia and Qatar are driven by the market where the third-party providers and banks are allowed to develop their own API platforms as they are conscious about the strategic importance of Open Banking to attract new customers and to gain a competitive advantage.
Countries like UK, Bahrain, Egypt and Kuwait are driven by the regional regulations where the APIs are developed as per the government specifications and sharing of data between entities is controlled & monitored by the government. These regulator-driven countries should perceive open banking as a chance to promote innovation into their financial services rather than a compliance burden as it embraces a more inclusive financial culture and brings all categories of individuals and businesses into an ecosystem where they can further integrate and flourish as a broader economy.
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