What Is Open Banking?

Would you like to manage your banking transactions faster and in a more controllable way without switching between different applications? This is exactly where open banking comes in, offering a new-generation financial ecosystem designed to meet this need. By enabling you to bring together accounts from different banks on a single platform, view your balances, and even make money transfers through open banking, this system stands out with its user-centric approach. So, how does open banking work, and how does it make users’ lives easier? On the Papel Blog, we take a closer look at how the open banking model operates and the key advantages it offers.

How does open banking work?

Open banking is a modern banking model that allows banks and financial service providers to share financial data with customers’ consent and offer new services based on this data. In traditional banking, data is kept within the bank’s internal systems, whereas in the open banking model, this data is securely shared with third-party service providers through API (Application Programming Interface) technology. In this way, financial information such as account balances, transaction history, or payment details from different banks can be collected and managed on a single platform. The working logic of this system is as follows:

First, the user gives consent through their bank for their data to be shared; then, secure access is provided only to the permitted information via APIs, and this data is used to offer services such as viewing account balances, tracking transaction history, initiating money transfers, or providing financial analysis. As a result, balance, payment, and transaction information from different banks can be consolidated on a single platform, allowing both individual and corporate users to manage their banking services in a more integrated, faster, and personalized manner.

What are the features of open banking?

The core features of the open banking model, which are designed to simplify users’ financial experiences, are as follows:

Managing accounts with open banking

Since accounts from different banks can be managed through a single digital platform thanks to open banking, users can view and track account balances, transaction histories, and other financial information from various banks on one screen. This eliminates the need to log into separate mobile or internet banking applications for each bank. Especially for users who have multiple bank accounts, this feature provides the ability to monitor their financial situation more quickly, regularly, and effectively.

Viewing accounts with open banking

Thanks to open banking, users can view payment accounts held at banks with existing integrations on a single platform, based on their explicit consent. This viewing process is carried out securely through API technology, and financial data is not shared with third parties without user approval. Users can easily track the balances and transaction movements of payment accounts held at other integrated banks via mobile or internet banking channels. This feature provides significant convenience, particularly in areas such as budget management, the creation of monthly financial reports, and credit evaluation processes. In addition, users have the right to withdraw the data-sharing permissions they have granted under open banking at any time.

Money transfers with open banking

Money transfers through open banking offer the ability to initiate direct payments between banks, unlike traditional methods. Users can easily initiate a money transfer from an account held at another bank through the mobile or internet banking channel of a bank. In this API-based system, direct payments are made from bank account to bank account without the need for intermediary payment institutions or card networks. This approach enables money transfers to be carried out in a faster, more transparent, and lower-cost manner, while improving the user experience and offering a significant advantage by reducing transaction costs for businesses.

 

Sources: 1, 2.  

 

This blog post contains general information, not legal, financial, or investment advice. The content is prepared for informational purposes only, and you are advised to seek professional advice for your specific circumstances. The expressions in this article do not carry any binding nature or responsibility and reflect only the author’s evaluation. All your decisions are your responsibility, and Papel Electronic Money and Payment Services Inc. accepts no liability for any consequences arising from them.