In the recent years, there have been few industries and few niches of business that grew as fiercely and as rapidly, as open banking. Not surprisingly, this had to do with the mandatory implementation of PSD2 across the EU and the EEA. Nevertheless, regulation and legislation aside, many businesses have embraced the concept for the new normal in banking and have been working tirelessly to take advantage of the huge upside of this situation. It seems that open banking aggregators have been heading the progress. But what exactly are they and how do they drive innovation in the sector?
What is an Open Banking Aggregator?
As you may or may not know, the most essential part of the open banking ecosystem is the API technology. There are many different APIs in the market but none of them, arguably, shine as bright as open banking aggregators. The aggregator APIs unify the links between third parties and many different financial institutions (banks). With an API aggregator, all you need is a single integration to become compatible with a handful of different institutions. This makes any financial service much more accessible. Without an aggregator, developers and providers could be in the need to create and program connections and integrate with each single bank individually. That would cost enormous amounts of money and take a very long time to complete.
Why are Open Banking Aggregators Relevant?
Just as mentioned before, TPPs need access to the main banks. This is the only way that they can ensure that their services are accessible to a broad range of users. In order to get that access, they need dedicated API and connections for each individual bank. Developing a specific tool for a single bank is very challenging. However, you can avoid individual developments and choose a data aggregator to provide a single access point to multiple different banks.
From the standpoint of a user, it’s all because members of the modern society have less and less free time but more and more matters to concentrate on. If open banking would not exist, customers would struggle and have their hands full trying to manage their finances. Logging in to check multiple accounts, monitor transactions and compile budgets is challenging enough. Include the different user-interfaces and you have something that is important but just takes too much time to handle. Open banking tools, and especially open banking aggregators have made such issues a thing of the past.
Are the Benefits of Open Banking Aggregators Tangible?
When new technology comes around, there is always a lot of hype surrounding it. For a lot of people, hype is enough to make them believe. However, for others, called skeptics, results have to be palpable and practical. If they’re only noticeable on paper, they’re not real, meaning that the technology is, in fact, useless.
Open banking aggregators are not useless, if not the opposite. Aggregator APIs can be implemented to help with a wide variety of services. For instance, a very common implementation is for budget management apps and services. If a person wants to know every single detail about their spending habits and have personalized recommendations that can help them manage money better, aggregators are the tools, providing the information to their money management apps, usually in real-time. Instead of having to write everything down manually, you can link personal accounts with the budgeting app (via the aggregator) and have insights within seconds.
Another common use is for making payments. For example, having to pay for utilities. Choose any one of the banks where you have an account and pay with that account instantly. Instead of having to create individual payment orders to each and every supplier, enjoy more convenience!