Open Banking is a recent innovation in Fintech that though it has a disruptive effect on the working model of the traditional banking system, these banks are gradually accepting it.
Open Banking in practice permits banks to give third-party financial platforms access to the financial information of a customer. These third parties are usually Fintech platforms.
They get this financial information on potential customers through the use of APIs and other data aggregation services and have a better understanding of the client.
Open Banking is believed to bring a breakthrough in the financial system, first, it’s the ability to revolve banking as a service, then the added benefits of giving insights that will help people transact, invest and save better.
Banks in some developed countries started accepting and granting access to the Open Banking system early enough. However, in Africa, this concept is entirely new and most are still wary of the whole thing.
In Nigeria, a non-profit organization under the name Open Technology Foundation (OTF) is driving the adoption of the Open Banking concept in the country.
Open Banking Startups
Though the Open Banking concept encourages banks to share financial information, startups are spearheading this innovation.
These startups have devised means to analyze the financial information about a potential customer and give insights about the customers’ financial habits which will aid decision-making for financial institutions these people will go to for financial aid.
Below are some open banking startups:
Credit Kudos
Credit kudos helps minimize risks for financial institutions that lend money by providing them with the information gathered on the customer.
They are also able to identify fraudulent accounts, the expenditure rate of the client, and any other financial character that puts the financial institution at risk when dealing with that client.
This Open banking startup then uses these customers’ financial behavior and transaction data to rate the customers’ creditworthiness, while also stating the rate of their income flow.
Overall, Credit kudos reduces the cost it will take these institutions to access their potential clients by themselves
TruID
Uses a user-friendly premium API to present customer information to financial institutions that need this information. Information ranges from Account information to bank statements.
With this readily available information, financial institutions can make quick decisions on how to serve their potential customers.
Importantly, truID seeks the customers’ permission before accessing their financial institutions.
Tink
This startup is multidimensional in its approach and services however, it also provides open banking solutions for both banks and other financial institutions.
Tink open banking solutions use an API that can be integrated into existing platforms to build account aggregation models, personal finance management products among others.
Railsbank
A unique open banking startup, Railsbank is situated in London and was founded in 2015.
Railsbank brings a distinct twist to the Open banking system, operating Banking as both a platform and Financial service.
As an open banking startup, Tink’s solution enables financial institutions and banks to connect and share data over APIs.
Thought Machine
This rather trades open banking software, works closely with banks to build their system from start to finish.
Thought Machine provides these banks with API technology that helps with designing loans, credit card models, and services for their potential clients.
Generally, open banking innovation is a welcomed development because of the ease it brings to the banking processes especially where loans are concerned.
There are however risks that threaten the open banking system, the biggest is phishing links posing as these third-party financial platforms to get access to customers’ financial information.
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