New Open Banking laws launched in the UK in January 2018 will pave the way for Facebook, Apple, Google, Amazon and Microsoft to access your banking details. Of course, the law will require the customers’ consent. With the tech giants entering fintech, the open banking system is predicted to infiltrate other countries as well. Forget about the current money transfer and banking Apps. Soon, users can IM money to their contacts.
In the near future, third parties will be able to access customers’ banking data by a combination of three new laws: the Second Payment Services Directive (PSD2) by the European Commission, the Open Data Initiative by the UK’s Treasury and Open Banking remedies by the Competition and Markets Authority. These laws will also serve to simplify account to account transfers and parallel banking.
What does Open Banking enable?
The law forces the UK’s greatest banks to share their customers’ banking data in a standardized and secure form. Open banking will enable authorized organizations to access the data online.
The bank users’ financial transfer records like mortgages, loans, insurance and so on will greatly benefit fintech organizations. The account holder will verify all information that is shared. Open Banking will attempt to encourage and advise customers to utilize the money in their accounts. The law will take care of dead end accounts and unnecessary overdrafts paid by account holders.
Facebook and others on fintech
The new law will provide access to Amazon, Facebook, Google and others through mutually benefiting schemes. The platforms will request access to users’ accounts for favorable returns; for example, an extra free month of Amazon Prime. Armed with valuable information, these platforms will use fintech to make banking and transactions easy. Sending money to people will be just a matter of typing the amount in your messaging page; there will be no need to collect account numbers and go through authentications. Fintech platforms will provide simple, personalized keys for customers to use.All payments made by customers will no longer be viewed by banks, thanks to these platforms.
The result? Banks will lose a lot of power over their most important asset: data. The banks need data to develop financial services and risk management measures. For example, banks need to verify transactional information before loaning out money. If Facebook and Google are able to decide customers’ worth through fintech, what do banks have to hold, but money?
A future of completely digitized and hassle-free financial transactions is within reach of bank account holders.