The UK government brought Open Banking regulations into the market from 13th January 2018. Through this, customers can securely view all bank accounts at a single place, and a lender can understand borrower affordability.
It can also help customers make better saving decisions through API assisted apps. However, the account holder doesn’t require sharing credentials with the lenders, bank, or other institutions.
The UK government requested initiative from the Competition, and Markets Authority (CMA). The regulations offered a platform for innovation and new product launches. It also helped to improve the existing simplified and essential banking apps, as well as payment accounts.
4 Significant Advantages of Open Banking
● Data Security and Protection
Banks and financial service providers use integrated and smart APIs to secure the Open Banking dashboards. The individuals and lenders also involve third-party processors to move the data.
According to UK government law, both lenders and financial institutions require strong customer identification. It is service that verifies user, and service identity. There are five primary security levels.
The protection levels include bank-level, FCA regulated, SMEs, extra protection, along with planning and forecasting. Besides this, the pandemic bought PSD2 into effect. Through this, financial institutions, service providers, lenders, etc., can open accounts. It is one of the required payments service provisions.
● Ease in Financing
Open Banking helps to receive funds quickly and securely by putting customer data upfront. Therefore, businesses and individual borrowers can view all their financial accounts on a single dashboard. Borrowers can even avail options for no credit check loans and other options on a single platform.
As mentioned before, Open Banking providers would use API to securely access customer information after receiving permission. Therefore, there is no need to share passwords, OTP, etc., to the service providers.
Additionally, Open Banking helps to boost the transparency of information and data. The system helps to tailor SMEs’ financial needs with real-time reporting, forecasts, support for foreign exchange, liquidity scenarios, etc.
● Make Better Saving Investments
API assisted apps and account access help to learn about better saving deals. Therefore, Open Banking users can decide the right time to open an account. The service providers also help customers learn about the best bank to open a savings account based on API results.
API stands for Application Programming Interface and is a standardized format of sharing information. In this scenario, Open Banking service providers use the API technology to share information and data with third-party companies.
● Provide Better Money Borrowing Options
Open Banking service people concerned with it should know that the Financial Conduct. Therefore, the service provides a paperless overview of the account holder. Thus, the service providers willingly offer better APRs on loans.
Moreover, the paperless transactions dismiss the requirement for a hard credit check. Therefore, money borrowers no longer have a bad credit rating. Additionally, it benefits first-time borrowers to verify the financial status, and avail loans faster.
Lenders can even judge the affordability of a person by viewing their information and data. Therefore, they no longer require trusting through word of mouth, brokers, etc. Lenders can even decide the maximum amount they want to offer to a borrower based on the financial status.
On the other hand, borrowers can know about the maximum loan amount available with or without a bad credit rating. Therefore, the Open Banking dashboard provides many loan advantages to both borrowers and lenders.
However, the service comes with varied doubts, mainly because it provides access to customer information. Therefore, people concerned with it should know that the Financial Conduct Authority and Open Banking regulations safeguard information.
Moreover, the authorization of information and data is secondary to customer authentication. Some central banks and corporations such as Barclays, Nationwide, NatWest, Monzo, Starling, Revolt, and others provide Open Banking services.
Besides this, Open Banking service providers offer customers the option to withdraw its use on personal decisions. Therefore, it is not mandatory to avail Open Banking benefits, and one can easily switch back to using their financial accounts.
Open Banking enables account holders to learn about the best time to open a savings account. It even helps to decide the best loan option based on the lenders available with the service providers.
Moreover, Open Banking regulations provide its benefits with data security and protection. The information becomes accessible to the service providers on account holders approval, even after receiving government approvals.
Furthermore, Open Banking functions with the help of an API. Therefore, customers, service providers, and lenders only require the account holder’s access permission. The paperless mechanism helps lenders to learn about borrowers’ affordability capacity.
Therefore, the service providers eradicate the requirement of a hard check for a loan. Simultaneously, the borrowers’ credit rating stays the same, and loan availability helps to complete repayments.
So, borrowers can improve their rating with a simplified financing mechanism. Additionally, lenders offer better APR deals to customers with Open Banking service providers because of complete access.
Account-holders concerned with this banking system should know that the service providers need to get enlisted. Therefore, the dashboards become entirely regulated by the government and come with measures to ensure safety.
Conclusively, Open Banking comes with enormous advantages and security measures that help to provide financial assistance.