Open Banking API – How Does It Work in the Real World?
The concept of open banking has been around for 20 years. However, it’s only recently that we’ve seen an uptick with open banking service adoption, especially after the global pandemic. Both small and mid-sized businesses became aware of the open banking ecosystem and its benefits, which include simplifications of credit grants, telecoms, insurance, and many other industries. So what role does an open banking API play and what exactly can it do for you?
For starters – What is API Technology and How Is It Used?
You might have heard the acronym API, but aren’t familiar with what it stands for. API is short for Application Programming Interface, and it can be explained as a link between an application and other separate programs, databases, services, etc. An API acts like an intermediary that helps you by governing access to particular information from a more convenient location.
A great example of an API is the button that enables you to pay with PayPal at the checkout of an e-shop. By clicking it you can pay with PayPal without ever leaving the site.
Open Banking APIs – The Current State
As you can probably guess, open banking API solutions help businesses and service providers access relevant and important data with regard to banking and financial information. A good open banking API won’t just have the necessary data you need to access. It’s also important it offers seamless integration with your systems and has international coverage. In the 21st century, you shouldn’t struggle with region-locked or region-restricted services, as well as complicated user interfaces.
By connecting your users’ bank account information with your system, you can make more informed business decisions much more quickly, and even automate a wide variety of processes at the same time. In our daily lives, open banking APIs allow us to share our financial data, such as spending habits and payment information, with third parties authorized by us. Developers use this data to tailor financial solutions, analysts use it to find strengths and weaknesses in financial services or make decisions about granting loans, and organizations can turn them into key research points.
Open banking APIs make customer banking data available in real-time, enabling them to make transactions, invest and save money more seamlessly.
What’s the Future?
As you can see, a fintech instrument with so many benefits is increasingly gaining traction. API solutions in the open banking sector encourage customer engagement by simplifying the sharing of relevant information for the personalization of services or better decision-making on the side of the business. Businesses can use this data to increase customer satisfaction by giving the customer the best possible service. It is a technological instrument that allows people and businesses to reap the benefits of open banking. Open banking APIs break the monopoly of incumbent banks pushing to sell only their own products by allowing trusted third parties to act as alternative distributors and provide products from a range of financial companies.
This article has been published in accordance with Socialnomics’ disclosure policy.