Open Banking is changing the business of financial institutions.

Open Banking is changing the business of financial institutions.

Technology is increasingly covering every corner of the financial system. Electronic banking, fintech, e-cheqs and the implementation of AI and data management have changed the way it works and develops.

Among the advances that are being imposed, Open Banking appears. But what is it and what is it for?

This involves the exchange of banking data between companies on the condition that it comes with the user’s approval.

The aim is to enable companies to offer products that are tailored and specific to each customer, proactively adapting their offerings to each profile and helping providers to develop new services. This also improves the financial inclusion of large segments of the population.

The Application Programming Interface (API) is the tool used to connect systems from different organizations and enable interoperability and networking between banking information and providers. This results in a bidirectional exchange where the entire network accesses the data of the other operators.

By way of example, we can take the case of personal finance. Currently, all transactions are carried out digitally, and the user manages all his finances from its device; banks and suppliers can understand everything from their financial profile to his consumption habits or job performance. When a company has access to this information, it can anticipate the user’s reactions and offer the service they need, such as guidance on purchasing, credit, savings and investments, and advice on budgeting.

But the most interesting thing is that the different financial institutions can exchange this data, which was not the case until now. This was possible because it was determined that the user is the owner of the data and, therefore, is free to dispose of it.


Progresses worldwide        

One of the pioneers was the European Union. With the idea of harmonizing payment regulation and consumer screening of all member countries issued in 2007 a guideline for a single payment system, which was updated in 2016 with greater emphasis on consumer protection under an Open Banking scheme.

One of the principles marks that, with the consent of the account holder, banks must grant access to financial information to any external provider, e.g. Fintechs.

All this within the framework of the reinforcement of the General Data Protection Regulation that unifies the protection of personal data.

Other countries that regulated Open Banking are Hong Kong, where the development and adoption of APIs in the banking sector is facilitated as part of its “Smart Banking” initiative and in Japan which amended the Banking Law and requires banks to open APIs for electronic payment service providers.

In the UK, communication standards were created between private banks and this meant that after a slow start, today there are around 700 million data accesses per month, in a country with 50 million people with bank accounts.

In Singapore two of the largest banks have more than 300 APIs each, and built a strong partnership ecosystem around their banking offerings.

In India, a good framework for customer data protection, authentication and security was developed and that led to the digital personal identification system, which was launched in 2009, now has more than 1.2 billion subscribers.


The challenge of integration

As mentioned above, the evolution of the financial system from Open Banking is based on the free circulation of data that users choose to share in exchange for a better quality of offer and personalization. This possibility also opens a challenge for Fintech and traditional financial institutions, which need to optimize data integration and management. From Conciliac, we developed the API Connector functionality within the Data Integration module, with the aim of allowing our users to connect to any public API autonomously, without writing a line of code, and with the possibility of choosing what data they want to get from each source.

Once integrated, it is possible to clean, consolidate, automate changes and replacements and even reconcile different data sources to finally have reliable, validated and refined data. In this way, we help all types of organizations in different industries and markets to optimize their data management to make more and better decisions, truly based on validated data.

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