Nowadays, the modern approach to conveniently access different financial services is known as open banking system, which makes dealing with banks hustle-free.
What Exactly Does Open Banking Mean
Open banking is a system that allows the involvement of third-party financial service providers to render its services in a secure but interoperable network of financial institutions operating in the banking industry. The system allows the platforms of third-party financial service providers to access bank data by way of a program known as Application Programming Interfaces or API.
Through the API of third-party organizations, processing of financial transactions is quicker, when compared to the banking system of before. Traditionally, customers have to physically fill up and hand over forms for bank processing. Today, the open banking system empowers bank customers to transact anywhere in the world while protected by a secure and managed environment
Is the Open Banking System Foolproof?
Open banking runs on a series of technologies, regulatory requirements and service protocols by which fintech developers innovate with new banking models, offering new services and other online capabilities. Fund transfers are no longer limited to establishments that belong to the same financial institutions. Similar to accreditations, the API provides the technological link that allows customers to pay online, use QR Codes or simply swipe to transact with various establishments.
The security technology of APIs involves rigid authorization and authentication capabilities in providing support to the open banking system. However, the system is not completely foolproof as there is always the possibility of payment service providers mishandling customers’ accounts either inadvertently or purposely.