The great majority of FinTechs find value in the concept and operation of open banking. FinTech refers to the computer programs, technology, and applications used to make banking and financial services work.
Open banking is a gadget that offers the person get entry to to the information of a network of economic institutions through the usage of application programming interfaces, commonly called APIs. An API is software that connects communication and information exchange between apps. Any given API connects two devices, apps, or programs to make the exchange of information between them possible. API also refers to the rules and protocols that govern the exchange of information and data between and among programs and apps.
What Is Open Banking?
The Open Banking Standard establishes rules for how data is created, shared, and accessed. By depending on these networks, open banking offered by financial institutions allows consumers to share their financial data among their financial institutions securely. The shared data can include bank account information, transaction history, consumer spending habits, and current credit reports, all made available via open-source application programming apps.
Also Read: 7 Cybersecurity Challenges Facing the Digital Banking Industry
Because of the easy availability of this shared data, consumers will find it easier to transfer funds among their various accounts. They will also find it an awful lot easier to compare the products and offerings presented by diverse financial establishments. This we could purchasers meet their personal wishes in a way this is value-powerful and tailored to their unique desires.
Why Do FinTechs Prefer Open Banking?
Steven Avila, Vice President, and Fintech Partnerships Manager at Sunwest Bank, explains it this way, “…Banking as a Service (BaaS) technology and software solutions enable fintech’s and other brands to quickly deploy deposit, loan, and payment products without having to select middleware partners.”
Once consumers begin customizing their financial institution experience, FInTech can use that customization to develop new services, products, and apps that are specifically designed to meet those newly defined needs.
This innovation is aided by the new gateway provided by financial institutions that are opening their APIs directly to licensed third-party providers; FinTechs. This innovation and collaboration mean that the future of digital financial services almost undoubtedly lies with the APIs and the FinTechs.
Among the things that FinTechs can provide through Open Banking are:
- analysis of account status and suggestions for best uses
- banking services tailored to the age/lifestyle of clients
- monetization of low-return services shared network-wide
