Open Banking is coming to North America. What can we learn from Europe?
Financial institutions that embrace Open Banking will compete more effectively and win in the digital age. Increased transparency and data driven tools will enable people to improve their financial strength, in turn improving relationships and profitability of the financial institutions that provide them.
In past decades, we have seen the rise of ‘open’ initiatives—from open source software and open government to open innovation. So what’s next? Open Banking. Open Banking is the accessibility and shareability of bank data with third parties upon customer consent via secure APIs. And it’s gaining fast momentum around the world. Even though countries are approaching Open Banking and data sharing in different ways, it’s for the same end goal: how to securely share customer data with third parties via APIs.
Previously, people would access their data by sharing their credentials (user-name and password). Today, people share their data with a spectrum of providers with little consistency as to how their data is used, stored, and shared. Moving forward, financial institutions and authorized third parties will use secure ‘tokens’ to share data that is more private and secure.
Open banking can increase the protection of data, while allowing people freedom to share it with applications or companies that offer products, services or price points they aren’t getting elsewhere. There are no global standards as of yet, and current approaches to figuring out how to make Open Banking work range from significant government direction and oversight to a more industry driven approach. The move towards Open Banking can ultimately improve the financial strength of individuals, households, and in turn, the economy at large.