The world of finance has changed. Technology has taken giant strides concerning all types of businesses and markets: communications, entertainment, sports, art, and more. These advances have not sidelined the banking system that, for some years now, has had to adapt to the new digital era.
Nowadays, operations that previously required to go to the bank have been replaced by mechanisms that allow transactions to be carried out from anywhere. But what if it were possible to go further? What if there were a way for all customer needs to be met through applications?
This and much more is what Open Banking brings with it. Its emergence has given rise to numerous unknowns for customers, bank owners and entrepreneurs alike. Want to know what it’s all about and what the advantages and disadvantages of online banking are? We’ll tell you right away.
What is Open Banking?
Open Banking is a little-known concept, due to its poor implementation by the banking system and the lack of customer education about it.
“Generally speaking, it is a mechanism in which customer banking information is shared to applications or APIs. In this way, an ecosystem is created that is conducive to generating business, solving needs, suggesting services and much more.”
Open Banking requires data related to credit cards, statements, and account types and everything that includes the customer’s finances. Once ready, this information is synchronized with the various emerging applications and starts an exchange process that facilitates the life of anyone thanks to the bank.
Of course, there are many advantages and disadvantages of online banking. The evaluation of them is what has generated many questions for its global application.
Advantages of Open Banking
With Open Banking come some advantages of online banking that benefit customers and bank owners. Some of them are:
- Helping customers in their operations: obtaining answers and services tailored to each person’s needs becomes easier with Open Banking. This is because, due to the infinity of APIs that exist and that can arise, everything is simpler. All you need is access to technology. Time spent is reduced and operations are automated.
- Centralization of services: with Open Banking, banks once again have full control over the various services their customers need: advice, loans, transfers, and financing. Thus, everything is done with greater order and under a single administration.
- Increase in the financial market: with the arrival of more clients in Open Banking, the diversification of APIs and services will be greater. In this way, there will be numerous offers adapted to the needs of everyone.
Disadvantages of Open Banking
Some of the drawbacks of Open Banking are:
- Low customer credibility: until now there has been an apathy or lack of credibility on the part of customers towards Open Banking. It is partly due to the fear of sharing their data, as well as to their lack of knowledge of how it works.
- The Fintech: the growth of those companies that have replaced the banks is a major drawback for Open Banking. The Fintech market is growing. Their services are diverse and more and more there are a large number of them in all countries. They are simple, fast and do not generate so many expenses for customers.
- It removes the interpersonal relationship with the customer: because everything is handled digitally, the face-to-face encounters between the customer and the bank are getting smaller and smaller. This can lead to a breakdown in the relationship.
Online Banking Security
The topic of security in Open Banking deserves special attention. It is currently a disadvantage, as customers fear that their data will be shared with outsiders.
This concern also encompasses some bank owners. There is a fear that their information will be exposed to cyber-attacks. Want to know an easy, quick and inexpensive way to deal with these attacks? Find out in our free guide to Identity And Access Management.
In any case, the solution to the problem of security in online banking is the development of software and APIs with appropriate structures and tools to ensure their operation. In this way, both banks and customers can rest assured that there will be no risks.
Challenges for the financial system in the digital environment
In order to regain the status that has been lost to Fintech for some time, the financial system of the banks must be reinvented. Many changes need to be made, starting with the adaptation to the digital environment.
An alternative such as Open Banking should be fully exploited. In order to do this, it is necessary to educate customers about its use and the benefits it can generate for them. It is also important to learn to compete with the current technologies that have displaced them, so it is very important to abandon obsolete systems.
Finally, it is necessary to learn how to take advantage of all security alternatives, such as software and programs that guarantee the care of customers’ data.
Open Banking is a great alternative to the current financial system. It offers many advantages, but it also has some disadvantages, being the security risks of sharing data the most important drawback.
This aspect can be remedied if you have a suitable software solution. Currently, the best option is WSO2, as it provides a completely secure system with high-quality technology. Did you know it before? It is the most flexible solution on the market.
If you want to know more about WSO2, or if you already knew it and want to know how to implement it, feel free to contact us!