The internet gave us access to information on an unprecedented scale in history. Think about the statistics bureaus. Access to their information was more difficult in the past. Nowadays you can get any data in three clicks on the internet. New technologies enabled also easier data collection opening the door to new indicators and measurements.
Open Banking is the next big thing of this kind. However, open and quick access to the data is provided to developers for building and growing their products.
If you used one of the modern budgeting mobile apps, you almost certainly used one of the Open Banking solutions. The integration with your bank account in these apps are made through the service. It stands between incumbent banks and disruptive FinTech products as a data aggregator and data flow facilitator. You log in, get your payments history check and put your money on the side thanks to Open Banking API.
Another example of the usage of Open Banking is an integration with the bank to check eligibility for the credit, instalments or factoring.
Wikipedia states that the term Open Banking refers to:
The use of open APIs that enable third-party developers to build applications and services around the financial institution.
Greater financial transparency options for account holders ranging from open data to private data.
The use of open source technology to achieve the above.
The purpose of Open Banking is the stimulation of innovations in the banking industry. It gives great potential for improving the user experience in financial services.
The question arises though, why would any bank want to give away their data to help potential disruptors who may be the competition in the future? Keeping a long story short the reason is a changing business model of banks to financial platforms and, in some regions of the world such as the European Union, regulations imposed to drive innovations.
For now, it is just the beginning. We will see in the story of Open Banking unfolds, which innovations it will bring to the table and how it will change the banking industry.