What is Open Banking
What is Open Banking ?

What is Open Banking

By 416Bitcoin | AAX Exchange | 4 Sep 2021


What Is Open Banking?

Open Banking

Banks have been around since antiquity as far back as the Assyrian Kingdom and then regained impetus during the Renaissance of the Middle Ages with Venetian Doges and Florentine rulers elevating it to a mathematical art.

But as banking evolved into the modern era and started embracing new digital developments like blockchain infrastructures and cryptocurrencies, one aspect has remained immutable as the foundation of banking. And that is not mathematics, but human identity.

All of our data belongs to someone other than ourselves. Be it Google, the online shop you allowed to leave cookies on your PC, or the local bank that gave you a credit loan. Every institution that comes into contact with clients, customers, users, audiences, citizens, or people in general, retains a portion of their personal data, which is later used for some purpose. Banks, as in the case of the given article, use the data of their clients to calculate creditworthiness, promote new products, estimate interest rates, and much more. But a new type of banking has emerged that is just as firmly anchored on the use of personal data – open banking.

In its classical financial definition, open banking allows companies to gain access to and control user banking and financial information through the use of third-party applications. By relying on network banking, as opposed to centralized banking, users can safely share their personal financial information with entities online and leverage the possibilities provided by financial and integrated finance startups. Considering that open banking is one of the cornerstones of decentralized financial services that require the use of personal data for fund transfers, the sector is becoming a driving force of financial innovation.

The broad availability of simple-to-integrate APIs and the ease of their use allows merchants and various companies relying on open banking to gain access to user financial personal data. The applications for such data are vast and range from anything including offering interesting products based on analysis of transaction data, to identifying the best interest rates for savings accounts or transfer facilities. Access to such data is also indispensable for marketing and the overall facilitation of interaction of financial startups with traditional banking systems.

The decentralization of open banking as a phenomenon is also beckoning on the horizon as a slew of DeFi services and crypto payment solutions are being integrated into the digital economy of the future. By utilizing convenient APIs that allow crypto payments to be conducted seamlessly using crypto bank cards, NFC terminals, QR codes, or any of the other means, institutions embracing open banking will be expanding their clientele and attracting a techno-proactive audience of users who prefer crypto payments.

Decentralized network accounts relying on the inherent virtues of blockchain, such as the immutability of records and the real-time updating of information, can give clearer pictures of users’ financial status. This can lead to better risk evaluation and the provision of tailored financial services automatically, thus saving time for small businesses on online accounting and providing near-instant fraud detection and protection.

Another major advantage of open banking pertains to the banks themselves. Seeing the rapid development of alternative financial products using open banking networks, banks are already becoming more competitive, evolving their customer relations and developing new products to stay in line with the trends of the time. Customer retention is the key focus of these new products, which are starting to offer more than mere transaction facilitation, but wholesome financial management solutions.

However, there are potential risks involved with open banking – risks blockchain and cryptocurrencies could help solve. Open banking poses risks to personal data privacy and the security of personal finances. The APIs being integrated en masse are not risk-free and the threats of malware, hacking, and the banal human factor are still very real. Blockchain and the transition to broader use of cryptocurrencies for payments can help make user data immutable and provide an additional layer of security.

While tech giants misusing user personal data and credit fraud may be on the rise, open banking can help consolidate such information for the benefit of users, facilitating their interaction with the financial sector and the institutions integrating such solutions.

Banking on AAX

AAX cannot be considered a bank, but as with a growing number of exchanges, AAX does offer a wide range of financial services. Apart from facilitating spot trading at no cost and high liquidity derivatives markets, AAX also offers high yield savings products with up to 20% APY on Bitcoin and other major crypto assets.

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416Bitcoin
416Bitcoin

AAX Offical Telegram Community Admin, and AAB holder. AAX is the world's first crypto exchange powered by LSEG Technology's world-renowned matching engine, giving you a chance to trade crypto at the speed of light.


AAX Exchange
AAX Exchange

As the official AAX Community Admin, I hope to bring you the last news for Atom Asset Exchange. AAX is the world's first crypto exchange powered by LSEG Technology's world-renowned matching engine, giving you a chance to trade crypto at the speed of light.

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