Over the last decade, we’ve seen big, established, traditional industries face challenges in the form of disruption. It happened to transportation and logistics with Uber; and to hospitality and travel with AirBnB. Now banks are faced with the prospect of being disrupted through open banking, an initiative that represents a great opportunity to make things better for people.
What is open banking?
Open banking is based on the simple idea that the data generated by a customer’s financial transactions belongs to them. It follows that customers who want unfettered access to that data should be able to do so in a simple and secure manner.
So, open banking is a proposed set of regulations, designed to provide consumers with choice in how they receive their financial data. Open Banking allows payments to be kicked off from software that isn’t from your bank: your accounting software could trigger invoice payments, or your personal finance app could make sure your bills are paid on time. Basically, a third party product or service—like an app—can now display and organise your data in a way that makes sense for you.
Where are the changes happening?
In Europe and Asia, Open Banking is already in play and regulation has begun. In the EU, Payment Services Directive 2 (PSD 2) was adopted in 2015 with the goals of improving payment efficiency across Europe, while offering consumers increased protection.
Read more about the implications of PSD 2
Japan is Moneytree's first market, and they are actually leading the APAC region in the adoption of Open Banking. New banking regulations passed in 2017 are already taking effect.
“We can strengthen the competitiveness of finance in Japan so that companies are free to select from diverse business models,” Aso Taro, Deputy PM and Minister of Finance, said. “This will encourage imagination, creativity and ingenuity from financial institutions and new entrants.”
From July 2019, banks in Australia must allow customers fuller access to their transaction data.
What will this look like?
To make open banking happen, banks will likely have to provide APIs, or Application Programming Interfaces. You can think of APIs as a direct connection to your data.
Rather than banks holding that key, open banking gives it to you. You can then choose to grant access to your data to services like Moneytree so that you can see and use your data in a way that makes sense to you. A shift away from a system where only large established entities control access to your data also opens up the playing field to fresh entrepreneurial approaches, with increased competition resulting in more and better choices for everybody.
Want a simple way to view your financial data? It’s easier with Moneytree.
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