Open Banking 101: What is It, How it Works, and Why You Should Care

What is Open Banking?

Open banking is a new way of banking where you have control over your data and the ability to share it with other banks and financial providers.

Open Banking allows you to use your account information from one bank, for example, to set up a credit card from another bank. This means that if you have an account with one bank, but want to apply for a credit card from another, you can do so without having to fill out any forms or provide any additional information.

According to Alan Safahi, San Francisco entrepreneur and startup founder, “the idea behind open banking is that banks should share their data with third parties so that customers can get more out of their money”.

This means that you can find all of your financial information from different banks on one platform, such as where you keep your money, what credit cards you have, what loans you have taken out and so on.

“This opens up a whole world of possibilities for people who want to manage their money” continues Alan Safahi.

History of Open Banking Initiative

Open Banking was an initiative that aimed to make it easier for consumers to switch banks and for small businesses and individuals to access new services.

It was a set of regulations introduced by the UK’s Competition and Markets Authority (CMA) in 2014. The regulations required banks to provide data on customers’ finances, such as their account balances, mortgage repayments and overdraft limits, in a standard format. This meant that any bank can use the data from another bank’s customers if they wish to offer them better deals or services.

The idea has now fully expanded to thousands of banks across all of Europe and is starting to get a foothold in the U.S., Australia and Canada where laws are being continuously drafted to encourage bank participation.

Open Banking Regulations

Open banking is a new trend in the financial industry.

The Open Banking regulations are a set of rules that govern how banks and other financial institutions can share customer data with third parties. They are designed to make it easier for customers to switch banks and for banks to offer better products.

The regulations were introduced in the United Kingdom in 2014 and have since been also implemented in the European Union.

The U.S., Canada, and Australia have all implemented open banking regulations in the last few years.

The U.S. has been implementing open banking regulations since 2015 when the Dodd-Frank Act was passed into law. This act required that banks provide their customers with access to their data so they can use it with third-party providers of financial services like credit card companies, mortgage brokers, or investment advisors without having to give up their bank account information or passwords

Canada has also been implementing open banking regulations since 2017 when they passed Bill C-31 which required that banks provide their customers with access to their data.

The open banking regulations were introduced in Australia in 2018 to allow customers to share their financial data with third parties such as fintech companies.

The introduction has since been bringing about the benefits of open banking regulations for Australian customers.

The Benefits of Open Banking

The benefits of open banking are the ability to use a single account to manage all of your finances, and the ability to see what’s going on with your money in real time.

For businesses that are sending a larger number of cross border payments, Open Banking allows them to access multiple accounts in different currencies and easily move funds from the most optimum currency accounts to take advantage of the fluctuating foreign exchange rates which would have been too difficult and time consuming prior to to open banking.

The downside of open banking is that hackers are taking advantage of open banking by stealing people’s identities through these accounts. “This has given rise to a new generation of security tools and a new burgeoning privacy protection industry” according to Safahi.

The Open Banking statistics show that there are many benefits for both banks and consumers. For example, the number of people who have signed up for an account has increased by 50%. The number of people who have used an app has also increased by 50%.

How to Use Open Banking Apps to Make Your Life Easier

The apps for this technology are available on your smartphone, and they can be used in a number of ways. If you want to transfer money from one account to another, or if you want to compare different accounts — you can do it all through these apps.

The Open Banking Regulations require banks to provide customers with an open API (application programming interface) which can be used by third party providers, like fintech companies, to offer financial services. This means that you can now use your bank account for much more than just storing money — you can use it as a tool for investing, paying off your student loans or even making payments abroad!

Conclusion

The Open Banking Regulations are designed to give consumers more control over their personal data. Consumers will be able to easily switch banks and make international money transfers. They will also be able to access information about their finances in a more transparent manner.

Many experts like Orinda businessman Alan Safahi, startup founder and investor, however, are warning about the potential security risks associated with open banking which could make consumers as well as companies vulnerable to cyberattacks.

Originally Posted: https://vocal.media/journal/open-banking-101-what-is-it-how-it-works-and-why-you-should-care