NEW DAWN TO OPEN BANKING: EMBRACING DIGITAL INNOVATION IN FINANCE

Open banking is a financial concept that refers to a financial services model that enables third-party providers to access financial information from banks or other financial institutions through open application programming interfaces (APIs).

- Lalit Kumar

About the author Lalit Kumar Chief Manager (Faculty) MBA, CAIIB and presently working as Member of Faculty with Union Bank of India, Zonal Learning Centre, Lucknow.

Introduction to open banking 

This model is designed to create a more transparent and customer-centric banking experience by allowing customers to share their financial data with other authorized providers of their choice.

The concept of open banking is not new and has been in the works for many years. It emerged as a response to the growing demand for more personalized and convenient financial services. In fact, open banking has its roots in the European Union's Revised Payment Service Directive (PSD2), which was adopted in 2015 and went into effect in 2018. PSD2 mandated that banks must open-up access to their customers' data to third-party providers, such as fintech companies, in a secure and standardized manner.

Since then, open banking has gained momentum around the world as more and more countries have implemented similar regulations and standards. In the UK, for example, the Competition and Markets Authority (CMA) introduced its Open Banking initiative in 2018, requiring nine of the country's largest banks to open up access to their customer data through APIs. Other countries, including Australia, Canada, and Singapore, have also implemented or are in the process of implementing open banking regulations.