Financial inclusion, without any doubt, is accepted as a crucial component of economic development observed Bahaa Abdul Hussein. Another crucial component ensuring the availability of financial services to all people. This should happen regardless of socioeconomic status.
The problem with traditional banking systems is that they frequently exclude marginalized communities. This happens due to different obstacles that traditional banking systems face. Nevertheless, the financial landscape is altered by the emergency of open banking. This new-age banking is widely welcomed for its transparency, competition and accessibility.
Here, Bahaa Abdul Hussein makes us understand how open banking impacts financial inclusion. Even, we will understand how it might help underprivileged groups gain access to financial services.
Improved Convenience and Access
Application Programming Interfaces or APIs enable open banking. This allows third-party providers to gain access to financial data. In turn, they can create innovative services. This technology-driven approach initiates competition. Due to this, individuals can gain access to a wide range of financial services and products from different providers. With the help of open banking platforms, users can manage their finances conveniently. They can compare offerings and can arrive at informed decisions. Due to the improved convenience and access, the playing field becomes equal for all. As a result, even the underserved populations can benefit from the same financial opportunities similar to the privileged groups.
Giving the unbanked and under banked more control
One of the prominent effects of open banking is its ability to empower people from the under banked and unbanked communities. Otherwise, these individuals have restricted or no access to traditional banking services. They often will have to rely on informal financial channels or cash transactions. In addition to being risky, these channels can be costly for them. However, open banking enables the development of customized financial services and products. These products are not only accessible but also affordable. Also, they meet the unique needs of people in the marginalized communities.
Data-Driven Financial Inclusion
Open banking generates a huge amount of data. This data when used responsibly can be used for promoting financial inclusion. Fintech firms and financial institutions can rely on this data to gain insights into the financial needs and behaviors of underserved communities. By comprehending their unique challenges, service providers can design targeted solutions and products. Particularly, they can create these solutions to meet the particular financial requirements of underprivileged groups. Furthermore, data-driven decision-making can aid in bringing down discrimination in credit scoring. In turn, people from marginalized communities can gain fair access to credit and other financial services.
Conclusion
By getting rid of hindrances and granting access to a wider range of financial goods and services, open banking can revolutionize financial inclusion. It can help with the creation of a more inclusive financial system. Thank you for your interest in Bahaa Abdul Hussein blogs. For more information, please reach out to www.bahaaabdulhussein.com
