The world of banking is changing. With the rise of Open Banking, consumers are now able to share their financial data with third-party providers in a secure and convenient way. This could potentially revolutionize the banking landscape, making it easier for consumers to get the best deals on products and services.
An Introduction to Open Banking’s current status
It’s been a little over a year since the UK Open Banking initiative was introduced, and there’s still not a lot of information available about how consumers feel about it.
Before Open Banking became law, there were plenty of surveys and polls asking people if they’d be comfortable sharing their financial data with third-party providers.
The results were often quite alarming, with a majority of people saying they would never change their banking habits to adopt Open Banking. However, it’s important to remember that these surveys were conducted before Open Banking was introduced.
Now that it’s been in place for over a year, it’s possible that attitudes have changed. It would be interesting to see another survey conducted, to see if more people are now open to the idea of sharing their data.
After all, the benefits of Open Banking – such as being able to see all your financial information in one place – are significant. If you’re one of the 53% who said you’d never change your banking habits, maybe it’s time to reconsider.
Open Banking – In a nutshell
PSD2 and Open Banking are the same things, just called different things in different places. PSD2 is the directive that demands banks must offer standardized APIs for approved 3rd parties to have access to account information and data as well as the ability to initiate payments.
AIS is the term used when referring to the opening up of access to customers’ account information and data. An example of a company that uses AIS would be Acorns. They are a FinTech unicorn that provides account information and budgeting all in one place.
PIS is the term used when referring to the opening up of access to initiate payments on behalf of the customer. This would allow for things like single-click payments on eCommerce sites.
The goal of PSD2 is to create more competition in the banking industry by giving power back to customers and providing them with more choices. This will create an overall better experience for customers and also lead to lower prices.
PIS, or Payment Initiation Service, is a way for providers to initiate a payment from another provider’s account- essentially meaning that the transaction is more like a direct bank transfer.
This service became available to consumers in the UK via KLM just over a year ago, and it has been incredibly helpful in terms of efficiency and security.
Not only does this method allow for a much faster transaction time, but it also bypasses the need for things like card numbers or bank details- making it much more secure overall.
Consumer Impact
Despite we may not realise it, open banking is already making an impact in our daily lives. When comparing products and services, banks are now required by law to share data with other financial institutions.
This means that when you’re looking for a new current account, for example, your bank will have to provide third parties with information on things like transaction history and monthly payments.
This increased transparency should lead to a better overall experience for consumers, as it will become easier to find the best deals on products and services.
In addition, open banking could also help to reduce fraudulent activity, as financial institutions will be able to share data more easily and quickly identify any suspicious activity.
Ultimately, open banking has the potential to dramatically improve the way we manage our finances – and that can only be a good thing.
Final words
What remains exciting to see, is what type of new products and applications will emerge from the new data streams available. For example, some banks are already using Open Banking to offer instant loans based on a customer’s data.
This could be expanded to include things like mortgages, investing, and even insurance. The possibilities are truly endless, and it will be interesting to see how Open Banking evolves over the next few years.