The financial market has countless words that may even be strange to an outsider, but are very important for anyone who is involved every day with the finance area.
But these terms do not only influence the work of professionals. In fact, each and every issue related to the financial market has a profound impact on the lives of everyone around the world.
Therefore, it is important to know as much as possible about these topics in order to be on top of what has been happening in this segment and Open Banking is one of them that deserves special attention.
Open Banking has received the media spotlight in Brazil more recently, while other countries have already been commenting on it for some time and using it in their daily lives with great responsibility.
The fact is that Open Banking has been essential and generated great benefits for the financial market in several matters, directly impacting the works in which it is related.
In today’s article, you will understand what Open Banking is and how it works in practice. We hope that the information we have gathered here is useful and that you enjoy reading it.
What is Open Banking?
Open Banking is an English term that means “Open Bank”, but an even better definition is “Open Financial System”.
With Open Banking, it is possible to organize and share customer data in order to understand their needs and requirements so that the bank can provide products and services that are ideal for each type of profile.
But there is one very important detail in all of this: the data can only be used when authorized by the consumer, who will decide what personal information he feels comfortable sharing, which bank to share it with and the period that the information will be in the bank’s possession.
When Open Baking has this data integrated into its system, the tendency is for people’s credit assessments to be clearer and more objective, in addition to providing a more competitive scenario among banks so that products and services are more attractive.
And how does Open Banking work?
The relationship between the customer and the bank involves a series of data that are necessary for this link to continue to exist. We can cite some of this information: loans, accounts, salaries, transfers, etc.
At this moment, Open Banking comes into play to help the customer gather this information and transport it to another financial institution of their choice, whatever the reason.
With Open Banking and the information in hand from the banks that the person already had, it is possible to request services from banks that offer better conditions for an agreement to exist.
In this way, the person saves a lot of time in the relationship with the new bank because their entire credit history will be standardized and available to be analyzed.
As the whole world asks for less bureaucracy, Open Banking has stood out in this financial environment and leaving no room for old methods and endless procedures to be practiced today.
Open Banking technology may vary from one financial institution to another, but the principle of standardizing data will always be the same.
In other words: even if the customer provides all of their personal data, Open Banking will only be effective if the technology employed is capable of open communication with all systems and has the appropriate APIs.
But APIs are a subject to the next topic.
The relationship between APIs and Open Banking
The term API (Application Programming Interface), which can be translated as Application Programming Interface, is a shared space of a given system that serves to communicate with several different systems.
And, incredible as it may seem, APIs are present in our daily lives: the hosting server of all websites on the internet talks to the browser that the person is using and loads the data through the API.
Open Banking uses this interface to carry out its work, as long as the APIs are open to people who are interested.
From this opening of information, the financial institution’s products and services can be improved to better meet the desires of consumers.
This is because the analysis of people’s behaviors based on the data will result in new solutions to the problems they have with banks.
But we emphasize again that this access to information is only possible if the customer shares it and allows its use by the bank.
The advantages that Open Banking offers
Knowing the advantages of Open Banking can be decisive for the success of a finance company. Let’s list some of them below:
Easy credit granting
When the person needs the bank to release more credit to meet their needs, Open Banking can quickly show the institution if this will be possible.
By offering an uncomplicated granting of credit, the bank will have a good idea of how the customer behaves according to his consumption profile.
Understanding the best products and services on the market
Open Banking will also help the customer to know what products and services are available in the financial market and what benefits they offer.
Thus, the client and the bank can compare conditions and work between institutions, ensuring that each choice is the best possible.
Reduction of bureaucracy to access financial solutions
Another advantage of Open Banking is less bureaucracy so that customers have democratic access to financial solutions.
Therefore, the volume of use of banking products and services increases considerably.
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