Open banking (or open finance) is the extension of data-sharing principles enabled by third-party providers access to customers’ data in the financial sector, explains Caroline Willard, president/CEO of the Cornerstone League in a CUInsight op-ed.
Open banking is not a new concept, she writes, and its structure is comprised of ‘Application Programming Interfaces’ or APIs. Paying with PayPal, using Google Maps, and weather widgets on phones, all rely on APIs.
“Think of APIs as the currency of the open banking ecosystem,” said Willard. “Introduced by regulators to open up competition and increase innovation, open banking has been 41 years in the making, since its origins in Europe, and found its way into financial markets.”
Willard explains how open banking has potential to build profits and loyalty programs for credit unions. Such benefits include invoices paid faster and more securely, receive instant loan decisions, and budgeting apps.
“As open banking—and our understanding of it—evolves in the U.S., credit unions are wise to watch what happens closely with an eye toward implementation if it makes sense,” advises Willard