How to make your banking data work harder for you
Author: Mirjana Berić, MasterCard - Business Development Director for Serbia and Montenegro
Taking root in the financial world is a simple concept that could significantly change how you interact with your money – from everyday purchases to taking loans.
It’s a concept called “open banking.” At its core, open banking tech is software that lets you give a financial tech company or a lender access to some of your banking data. It’s akin to privacy permissions on your phone that let an app use your camera or storage. It’s the tech infrastructure powering some of the most popular financial apps, including Venmo and Robinhood.
This technology is part of a revolution in commerce and banking, with the pandemic speeding up the move to online shopping and digital currencies like bitcoin opening new opportunities for lending, payments and savings. Open banking and many of these other concepts give consumers more choices and can bring more people into the global economy by making it easy for them to save and send money.
More broadly, open banking will help just about everyone with a credit card or checking account get more out of their relationship with their bank. It gives you the ability to take your financial data that’s usually housed at your bank and have it start working a lot harder for you.
For instance, you probably have accounts with a variety of banks and apps. Open banking could eventually let you move the information for all those accounts into one real-time dashboard of your choosing, so you can see all your money in one place and do it securely. With all that data brought together, personal financial management tools can be overlaid atop that information to give you insights on your spending and savings.
The potential for that kind of change will encourage banks to keep innovating to make sure they are providing you the very best user experience, or else you may start using a different service instead.
While that increased convenience for millions of customers should make life a little easier, using open banking to increase access to credit has the potential to help a lot of people who couldn’t get loans. If you decide to use an open banking service for a loan – and millions of people already have – you allow a lender to look at your cash flow, savings statements and credit card purchasing to get a far better picture of your creditworthiness than a single credit score.
Added to that, often credit scores don’t offer an up-to-date picture of your finances if you haven’t recently borrowed money. Again, these open banking services fix that problem by helping you provide the right information to lenders.
That kind of more sophisticated and detailed data has enabled people like retirees and new immigrants and so many others to get loans for down payments, school and new vehicles. It’s that kind of technology that helps many people take advantage of valuable financial tools that before were just out of reach for them.
MasterCard is taking a leading role to develop this new world of open banking because we know this greater convenience and broader access can’t be achieved without trust. As tech companies and banks develop ways to put people’s financial data to greater use, there must be control, there must be transparency and there must be permission granted by users.
That means the consumer needs to be at the centre of what we do as we create this new ecosystem. Done right, it can create more financial opportunity for everyone.