Open Banking – The future of transparent banking
What is Open Banking?
Even if it is not a particular area that you yourself have expertise in, there is a good chance you may have heard the term ‘open banking’. This is a financial technologies term within financial services. It might seem like buzz words of the moment, but it does stand to make a very real and significant impact on banking, including online services such as online retail.
Firstly, open banking relates to the use of open APIs that allows third-party developers to build applications and services around the financial institution. Another aim of open banking is that it would provide greater financial transparency options for account holders, be it open or private data. The idea is that the above would be achieved using open source technology.
The future of banking
Open Banking has opened up options within various sectors including online shopping. David Goodbrand, who is head of law firm Burness Paull’s IP technology says “Open banking is the future of banking.” Now, if Open Banking effectively means there will be more power back in your hands regarding your financial data, you can see how this could have effects on online retail. After all, you will be able to use a single platform to easily and securely manage your money over all the different online shops you would use normally.
What’s more, you could also potentially discover savings on your purchases, as retailers could use your banking data to reduce transaction fees. You can also expect them to use your data to tailor products that they believe may suit, or create reward programmes more unique to each user based on their spending habits. Flexibility would form in the customer to retailer relationship that was not previously possible. Special offers that retailers like to present you with, for example by email or during the online shopping process itself,would be rendered based on your shopping habits. Essentially, you can expect a more personalised shopping experience than ever!
Of course, having online shops being able to view your data will no doubt be a concern for some. But remember, the customer has to give consent for each individual retailer to gain access to their data.
A fair issue to bring up however, is what about the chances that a high amount of customers refuse retailers the ability to use their data, in the ways outlined here? Many might decide that whatever benefits there might be to retailers using their data for a more tailored experience, it is not worth the other considerations. In this day and age consumers in general are well aware of how important their private data is, and what can go wrong if it falls into the wrong hands. Consumers may not trust retailers to keep their data safe, worried about such things as cyber attacks, or the retailers themselves selling on information.
Accept payments without intermediaries
But another change in the open banking drive is that retailers will be given the opportunity to accept payments directly from a consumer’s chosen financial institution, without having to have an intermediary. A knock on positive effect that customers could gain from this includes refunds being able to be processed quicker. As a big gain for both the customer and retailer, fraud stands to be minimised too. Furthermore, the retailers can offer a more flexible payment service, and benefit themselves by bypassing card networks and fees, hence increasing their cash flow.
Throughout the world we can expect the volume of online shopping transactions to keep increasing, but with the arrival of open banking, we can also expect some exciting changes to the game. It is hard to predict completely how the online shopping experience will change over the coming years due to open banking, but we can certainly expect to be looking at quite a different landscape then we currently have.