How can open banking technology help you save time and money?

Picture the following scenario:

It’s a relaxing Sunday morning, and you are on the couch with your favourite hot chocolate, doing some documentation. You want to know about your account's performance. You start by exploring the accounts you have. However, the task soon becomes tiring as you recall every bank account credential and make notes. Suddenly, you remember that you are due a refund, but cannot remember which account you used to pay the bill.

So, you log back into your banking applications to find out. You lose 2 good hours in finding one, and your hot chocolate no longer displays fresh brews. Precisely, you missed the delightful start to a Sunday morning! Frustrating! Doesn’t it? Now, let’s imagine you wish to do the same tasks and can do it with just a single application. Yes, it will save you enough time for a good Sunday nap and watching your favourite show! All thanks to Open Banking technology.

What is Open Banking in simple terms?

Earlier, your financial data used to remain a top secret between you and just the bank. However, this restrictive interface leads to investing more time in remembering passwords and logging details of your financial accounts. It eventually made one irritating (just like the scenario) above.

With Open Banking technology, you can share your data securely with other financial providers through APIs or Application Programming Interface. This interjection helps you view multiple accounts at once on one platform. You may even get personalised tips regarding budgeting and spending habits.

Moreover, you can use the platform to initiate payments from one of your financial accounts without re-entering the passwords. It also helps direct lending companies analyse the individual’s creditworthiness without asking for specific documents.

How does Open Banking architecture work?

When you contact the creditors and service providers for access, each provider will confirm your choice to share the details with the Open banking software. Later, it will send the request to your respective bank demanding approval. The bank then processes the request and shares your credentials with the open banking application.

The banks share your information through a safe passage, like an API, which passes the information with your consent to the open banking portal. Sharing your data also enables you to access products and services tailored to your requirements. It grants you more control over your financial management and budgeting. You always know the data you share, with whom you share it, and can close sharing at any moment.

What are the pros and cons of the Open Banking technology?

Open banking architecture helps integrate modern digital transformation with established banking institutions. It makes the financial dealings more customer-friendly, efficient, and inclusive. Here are some pros and cons of open banking technology:

Pros of Open Banking technology

• Allows customers to access a broader range of products than what a bank may offer
• Simplifies financial management by helping manage different accounts from a single application
• Identify the non-operational investments and re-plan one
• Increased competition for better services leads to budget-friendly open banking solutions
• The technology helps individuals with no financial history take up personal loans with just a rental and utility bill payment credit history
• Helps get instant access to credit facilities as you don’t need to provide financial details and other things again. It helps you save time on getting an urgent loan.

Cons of Open Banking Technology

Although open banking provides a wide ground for financial management, alterations and boosting investments, it has disadvantages too.

• Customer data may be vulnerable to misuse without proper encryption and security standards.
• Getting regulatory compliance from multiple platforms for Open banking is challenging. It is especially for countries that have complex open banking technical standards.
• The vulnerability to available data increases the potential for financial fraud.
• The absence of the right regulations leads to inconsistencies in quality of service. It may put off the customers.

• Managing transactions through open banking involves hidden charges. These costs pass to the customers or the third parties. It affects the services that customers need at that time. What if he fails to process a payment due to cost confusion? Here, an emergency loan may help meet the cash needs. With no hidden costs and a simple process, it is a popular option for critical needs.

How may open banking technology help users?

Open banking restructures how businesses, customers, and banks regulate financial data. Here is how it may help users:

1) Innovate services as financial service providers

Most direct lending companies, banks and other financial institutions seek innovative ways to regulate customer data well. Open banking eases the deal for every organisation by getting access almost immediately. According to the customer’s usage and financial management, the financial firms and direct lenders may improve their offerings and terms.

2) Help automate business payments

Innovations by financial providers may mean more efficient management in business. It will help you regulate transactions, payments, payrolls, taxes, and other operational expenses without worries. Moreover, you can set automation for most payments to save time on manual payments.

Improves financial dealings for customers/ individuals

Having access to all financial platforms by using just a single software release reduces the stress of financial dealings. One can save, invest, spend and loan without engaging in finding the credentials of financial accounts or providing detailed documentation.

Is an open banking technical tool safe to use?

Yes, open-banking technology is regulated and safe to benefit from the financial services. However, it is only if you deal with an authorised open-banking technology service provider in your region. The financial services and creditors will only be able to access data if you consent to it.

As per the rule, all service providers must comply with open banking technical standards, including the purpose for which they will use your data. Moreover, they must provide information on the actions they will take after you sign up. Never share your data with a service provider if you are not sure about their identity. You can confirm the authentic ones by checking the UK Open Banking Directory.

Bottom line

Open banking technology is a boon for individuals with multiple financial accounts facing challenges in managing them all. It helps you regulate every single penny from just one platform. You can budget, save, invest, transact, and monitor your financial growth simultaneously. After consenting to sharing the data with third-party providers, you can conduct purchases or get a loan instantly. It eliminates the hassle of re-entering the details.