How Banks Take Advantage of Open Banking?

 Open Banking is an often misunderstood and somewhat esoteric term within the field of finance. Some people know what it's all about but few can describe it in laymen's terms. Open banking is a complex financial concept which refers to: a) setting up of bank accounts and b) the practice of banking, i.e., credit risk transfer. More simply stated, it means that if you have a checking account, you can take money out whenever you need it, as long as you hold the appropriate account balance.

In other words, consumers who have open banking accounts are given the freedom to transfer funds when they see fit. This freedom from loan terms and interest charges gives them more choice in selecting financial instruments to use for their money-management needs. One example is consumers who have multiple checking and savings accounts may choose to take advantage of the flexibility offered by opening one or more of those accounts and taking out a loan against it. If all the consumers in a family need a certain amount of money at a certain time (let us assume that the children will be going to college in the near future), each family member can choose to either use the available loan amount or pull out a separate account for that purpose.

The Open Banking Association is an international association of banks and other financial institutions which defines the Open Bankered principles for setting up and maintaining open banking. Among these principles are that: "a customer should have access to all the financial data that we have in our records whether that data is recorded in the individual's account, the group's account or both". Another principle is, "A customer should have the option to change the security settings on a password or access PIN at any time". And finally, it says, "We will consider customer requests for changes in payment services relating to PINs to be submitted via the Internet or through a toll-free fax".

Open Banking practices also allow consumers a greater degree of control over their finances. This is because they can specify what happens with their money - for example, they can decide if they want to use an automatic savings or checking account. This also enables consumers to plan their budget. And as long as Open Banking remains in place, consumers are guaranteed a right to open an account even if they move to another address or have their primary banking account closed down. Also, they can set their own interest rates, for example a lower rate can be applied when the consumer carries a small balance or has not been making large withdrawals.

However, there are many critics of open banking. They argue that some financial services are better served by requiring customers to keep more cash in their accounts. Some also argue that institutions should not be allowed to sell sensitive personal information, such as credit card information, to third parties. Finally, consumers can criticize institutions for charging them overdraft fees and for charging exorbitant service charges.

In addition to banks, money lenders and other institutions can take advantage of a consumer's open banking status as well. For instance, money lenders can get access to account information that would otherwise be confidential. Money lenders can also use thisinformation to apply high interest rates and for aggressive loan applications. But as long as consumers are aware of the privacy and security risks that may arise from open banking, they can take advantage of these services at their leisure.