5 Things You Didn’t Know About Open Banking in Europe
There has been a massive overhaul in the banking sector in Europe with the introduction of an open banking system. Such a banking system allows third-party providers to access payment methods and other transactions from banks for the benefit of the end users.
The appearance of open banking has revolutionized the traditional banking system with user-friendly features. This practice is changing the overall banking service to meet the requirements of the modern world. So if you’re living in Europe, you should have a proper idea about the open banking system because it’s having a big impact on transaction processes.
So here’s a list of five things you must know about an open banking system in Europe.
1. PSD2 Facilitated Open Banking in Europe
The core of open banking in Europe is the Revised Payment Services Directive (PSD2). Without the introduction of this legislation, open banking practice wouldn’t be possible in Europe. The EU first introduced PSD2 to bring an integrated and efficient payment system to Europe. This new legislation also ensures a fair and smooth transaction process in the European market.
PSD2 resolved several issues of payment, including security and transparency. As a result, the concept of open banking is established.
One of the biggest advantages of establishing PSD2 is that it has removed the right to hold customer data from banks. This has given the power back to the end users as you can give access to multiple third-party companies to manage your financial condition efficiently.
Currently, the EU is planning to introduce PSD3, which will give you the opportunity to make faster transactions with more security.
2. Open Banking Allows Third-Party Companies to Shine
One of the biggest advantages of open banking is the freedom of the customers. Customers and end users can give data to their preferable fintech and other companies. This will allow third-party services like insurance companies and embedded fintech to give the customers a better service based on their requirements and needs.
The open banking system not only helps insurance companies but also opens the door to several other companies for cross-selling. Many companies can now access the data with the customers’ permission and design their products and services. They can also have insights on which sort of products their customers like. They can use these data to attract customers with more personalized services. This will also help the seller reduce the costs and achieve customer satisfaction. As a result, these companies can acquire a higher rate of conversion and have a good profit margin.
3. Open Banking Makes Transactions Easy
One of the biggest issues with traditional banks is the lack of flexibility in transactions and other user-related services. Open banking has made things a lot easier for the customers. Since open banking has integrated technology into its system, end users can easily track their transactions. Open banking also made switching to another service easier. It has made transactions smoother and faster for the customers.
Besides, with open banking, one can transfer money from one account to another in an instant. Whether it’s a balance transfer or automatic payment, traditional banking would take hours to complete, even the easiest of tasks. But you can solve all sorts of banking-related issues within minutes in open banking.
On top of that, open banking allows you to pay less for transactions. Instead of paying with cards, you can have a wide variety of options for payment. You can choose A2A payment or any payment gateway system you like for daily transactions.
4. Open Banking Provides Security
One of the core benefits of open banking is the assurance of safety and security while making transactions. Open banking ensures the utmost security in payment methods. Without proper security measures, third-party services won’t be able to operate their business in open banking. Credit goes to the EU for the PSD2 legislation that implemented a higher amount of security in this sector.
The PSD2 legislation ordered an improved authentication system called Strong Customer Authentication (SCA). These are authentication requirements that include multiple factors of authentication checking. For instance, when you opt for online payment, you will have to go through a set of multiple authentication techniques to verify. This verification process provides additional security in payment and prevents any types of fraudulent activities. Your transactions are also detected by high-level software.
In case of fraud, the money will be paid back to your account immediately by the bank. In addition, you’ll be protected by data protection laws. As the innovation progresses, more safety-related rules will be introduced in the future to solidify security in open banking.
5. Open Banking Is Full of New Possibilities
Although it wasn’t very long since open banking was first introduced, this practice has made a huge difference in a short time. The best part? New features and benefits will be added to improve the customer experience.
Open banking in the UK has achieved a significant amount of popularity among customers. Now, open banking is expanding to more countries in Europe. In the future, open banking will be a standard for all kinds of financial services. The financial third parties will have more data to analyze customers’ financial status in an integrated technology in the future. They can also be able to solve even complex problems with more innovative solutions.
Besides, the easier, faster, and cheaper transactions in Europe will facilitate more trade and attract new clients. With data sharing, customers can get all their financial services in one place. This convenience will encourage people to put their trust in the new and improved banking system.
Open banking has changed the shape of the latest banking system by providing security, customer-centric features, and innovative solutions. Open banking can be the perfect system that can be aligned with the latest technologies.
These above-mentioned things can give you a proper idea about open banking so that you can put your trust in this new era of transaction and payment systems.