Page 31 - Banking Finance December 2023

ARTICLE

NEW DAWN TO

OPEN BANKING:

EMBRACING

DIGITAL

INNOVATION IN

FINANCE

Introduction to open banking financial services. In fact, open banking has its roots in the
European Union's Revised Payment Service Directive (PSD2),
Open banking is a financial concept that refers to a financial
which was adopted in 2015 and went into effect in 2018.
services model that enables third-party providers to access
financial information from banks or other financial PSD2 mandated that banks must open-up access to their
customers' data to third-party providers, such as fintech
institutions through open application programming
companies, in a secure and standardized manner.
interfaces (APIs). This model is designed to create a more
transparent and customer-centric banking experience by
Since then, open banking has gained momentum around the
allowing customers to share their financial data with other
world as more and more countries have implemented similar
authorized providers of their choice.
regulations and standards. In the UK, for example, the
Competition and Markets Authority (CMA) introduced its
The concept of open banking is not new and has been in
Open Banking initiative in 2018, requiring nine of the
the works for many years. It emerged as a response to the
country's largest banks to open up access to their customer
growing demand for more personalized and convenient
data through APIs. Other countries, including Australia,
Canada, and Singapore, have also implemented or are in the
About the author process of implementing open banking regulations.

Lalit Kumar One of the main goals of open banking is to promote
Chief Manager (Faculty) innovation and competition in the financial services industry
MBA, CAIIB and presently working
as Member of Faculty with by enabling new entrants to offer innovative services that
Union Bank of India, leverage customer data. This has led to the emergence of
Zonal Learning Centre, Lucknow. a wide range of fintech startups offering services such as

28 | 2023 | DECEMBER | BANKING FINANCE