What does Open Banking mean?

What does Open Banking mean?

Open Banking is not a fad or a hype—it is a sustainable change in how we will conduct our banking in the future. Not only as private individuals, but also as companies.

Open Banking enables the use of banking services outside the banking interface of one’s own bank, for example with the help of an app. This is provided by a third-party provider and integrates classic banking as well as other financial services or services into an external interface.

API banking—how Open Banking is often also referred to—is often seen as problematic for traditional financial institutions, but it also harbors enormous opportunities for banks. Innovative neobanks are already using the possibilities of Open Banking to offer their customers an even better service.

How is Open Banking possible for third-party providers?

It is made possible by PSD2, the Payment Services Directive from 2015 for banks within the EU. This directive obliges financial institutions to open up the banking landscape to third-party providers. A basic prerequisite is, of course, the consent and use by the customer themselves. However, many banks are cautious about offering Open Banking solutions in cooperation with third-party providers, as they fear the loss of their bank customers and customer data.

How does Open Banking work?

Open Banking is made possible by interfaces—hence the term API banking. By means of these interfaces, a wide variety of banking data and financial services can be quickly and easily integrated into apps or software solutions and information can be exchanged. Interfaces are provided by the banks themselves or by financial service providers, such as finAPI.

This makes banking not only more modern for users in particular, but also more versatile and convenient.

Advantages of Open Banking applications for companies

This means specifically:

Open Banking solutions enable, for example, multibanking in just one interface. They provide an overview of all existing bank accounts—even if they were opened at different financial institutions. All transactions can also be presented clearly and evaluated.

Furthermore, thanks to Open Banking, it is permissible to initiate transfers from an external app or to issue SEPA direct debit mandates. And this without being logged into the respective banking interface of the bank.

Open Banking solutions also ensure that all important financial key figures can be found in one place—an important point in everyday business. This makes the merging of data from different sources in Excel spreadsheets or other evaluation tools obsolete and saves a lot of time that can be spent on value-adding tasks.

Conclusion

Open Banking is a great opportunity—especially for companies—to save time, use resources more efficiently and in a more value-adding way, and to keep track of one’s own finances even with a large number of accounts.

Do you want to find out how your company benefits from integrating banking processes into Salesforce? Click here to get to our contact details and contact form, and we will answer all your questions!

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