Imagine securing loans with some of the lowest interest rates in the industry. Or conveniently transferring funds from one bank account to another, or perhaps, experiencing the best possible customer banking service around.

This encourages banks to be more competitive, leading to more affordable products, faster services, better customer relations, and investing in digital technologies.

To get all these and other “perks,” most financial institutions require one to become their preferred client. But with digital technology, accessing all these benefits is simply a matter of customers securely sharing their data with other financial institutions. This is the beauty of open banking.

Open banking enables financial services customers such as companies, entrepreneurs and ordinary depositors and borrowers, to have access to various products and services from competing banks and financial institutions by allowing the latter to securely access their financial information. Customers can compare product offerings and avail of the best that suit their needs and fit their capabilities, thereby helping them earn more from bigger savings interest rates, avail of loans more easily, and pay more conveniently, towards managing and improving their finances.

With open banking, financial institutions as banks — big and small — fintech companies, and other players, can share their respective clients’ data through the use of application programming interfaces (API).

These API enable customers or the data subjects to share only data pertinent to the product or service they are looking to avail and not the account credentials.

The European Union (EU) initiated PSD2 (Revised Payment Service Directive) as an emerging Open Banking standard. This is a game-changer in the industry as banks’ monopoly on their customer account details will soon disappear. This required European banks to provide Open API which does not need additional customized developments. It reduces barriers to innovation and limits the big banks’ “walled gardens.”

In fact, even the Philippines’ data privacy law was influenced by EU’s stringent data protection regulation, including the adoption of the General Data Protection Regulation.

Open banking can enable banks and other financial institutions to have access to data that will enable them to process loan applications quicker or better advise their clients on their finances.