Open Banking is a financial services term used to describe the use of open APIs that enable third-party developers to build applications and services around the financial institution. This allows customers to securely share their financial data with trusted third parties, such as fintech companies, to access new and innovative financial products and services.
Some examples of use cases for Open Banking include:
- Personal finance management (PFM) tools: Third-party apps can use Open Banking APIs to connect to a customer's bank account and automatically categorize transactions, providing insights into spending habits and helping customers budget more effectively.
- Credit scoring and lending: Fintech companies can use Open Banking to access a customer's financial data to make more accurate lending decisions, and to offer customers more personalised loan products.
- Payment initiation: Third-party apps can use Open Banking APIs to initiate payments on behalf of the customer, allowing for more seamless and secure online shopping experiences.
- Open banking can also be used to improve fraud detection and prevention by providing additional data points for risk assessments, as well as to improve customer onboarding by reducing the need for customers to manually provide financial information.
Updated 11 months ago