Make Ends Meet: The future of merging financial accounts with open banking
LOUISVILLE, Ky. (WAVE) - Most people have an average of five to seven different financial accounts, including credit cards, debit cards, checking accounts, savings accounts, stocks and possibly a 401k. Each one independent of the others.
Open banking, currently not yet in the United States, would give a person the ability to access and act on those services as if it all were one single account.
For countries using open banking, it allows for their services to be more personalized or tailored to their lifestyle and behaviors.
The Biden administration issued an executive order to boost the Consumer Financial Protection Bureau’s decade-long effort to kickstart open banking in the U.S.
In Europe and the U.K., open banking is regulated, and some estimates show that 87% of countries in the world offer some form of open banking. However, many Americans have never heard of open banking.
Huw Davies, Chief Commercial Officer at Ozone API, is on a mission to accelerate open banking.
“This is something happening all around the world,” Davies said. “The number of customers using this are growing 50% year on year exponentially, and will be into the hundreds of millions of users around the world very quickly.”
Open banking is not new, but its acceptance and use is on the rise. Davies said it will allow users to bring all their financial and business services together.
“There are lots of benefits, but they’re fundamentally driven by putting customers more in control, so they can engage with their finances in the way they want, with the service provider they want, in the way that suits them,” Davies said.
Simply put, open banking gives a person the ability to share your financial account information with a third-party provider.
In the past, only a person and their bank could access that financial data. It would make getting a loan, getting a home, getting a credit card and any other financial service mush easier.
“You can literally press a button, give your consent, and all that data is automatically passed to them so they can make a decision without you having to provide all that,” Davies said.
For those who are unbanked, underserved or unable to get a credit card, loan or other services, open banking will improve access to financial services for these consumer segments.
Open banking helps to give a full financial picture of common ordinary bills that people pay on time, like their cell phone, their rent or their car payment.
“If they can show they’re regularly paying their bills, their rent; and it’s clear what’s coming into their account and what’s going out, lenders can make much better decisions,” stressed Davies. “And all of a sudden, a whole load of customers that were previously excluded can start accessing these products.”
The United States is lagging behind Asia and the U.K. where open banking is in use and regulated, but Americans may soon have a few more opportunities pooling all their financial data all in one place.
“It’s without a doubt a global phenomenon,” Davies said.
The hang up to bringing open banking to the U.S. is privacy concerns. Consumer privacy and data protection is paramount. The more data shared, the greater the chance for privacy breaches, cybercrime, and fraud.
Davies believes when it is available to American consumers, it puts the customer in control of their data and choices.
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