TOP 5 industries to reap the benefits of open banking data in 2020
Data is everything in today’s world: we share it every day via our phones, watches, cars, and even fridges, probably, – it is the new reality and we are used to it. But it is completely different when we talk about our financial data, isn’t it? Well, new technologies change the reality in every aspect and the financial industry is no exception. The open banking phenomenon makes the market more transparent and brings data aggregation with its multiple benefits to a wider audience. So let’s take a closer look at what kind of companies can successfully use customers’ financial data to the ultimate benefit of the latest, of course.
Smart financial decisions via one app
PFM (personal financial management) applications aggregate open banking data from all types of accounts, like loans, investments, and mortgages, and help people see all of their finances in one place. Data aggregation sets the base for a PFM to become a marketplace for end-user for making all the financial decisions in one app. The app can propose to make savings automatically, most suitable investment options, loans from an external lender or better saving account conditions from a partnering bank. It is obvious that high quality data aggregation and connectivity to dozens of banks are crucial for PFMs to provide their customers with valuable services.
Banks go beyond banking
As PFM startups become wildly popular, banks now have PFM apps, too. To take it to the next level, they can even provide their customers with an option to connect accounts they held in other banks, becoming customers’ bank of choice and giving 360º view of their finances. However, banks have a clear advantage over PFMs – they can offer their users custom banking services based on the aggregated data. Seeing all the accounts, banks can identify unused funds in other institutions and make their customers a much more lucrative offer on how these funds can be used, offer better loan or mortgage conditions. Such a customized approach will help increase engagement and loyalty, because happy customers who feel cared for will stick with the same vendor in any industry.
Digitized lending of the new era
Business digitalization creates many opportunities and benefits for lenders, as well. They can get a new channel of real-time financial data, including customers’ income, transaction history, assets, savings, etc., instead of using a standard and outdated data set from a credit bureau. On top of the raw transaction history and account balance fluctuation, lenders can apply data science and sophisticated algorithms to enrich data and generate reports on specific criteria: credit usage, cash flow, and income stability. Lenders will not have to worry about fraud risk, because applicants’ information can be instantly cross-checked with personal data from bank, such as name, address, employer ID, and more.
Using bank data aggregation allows lenders to increase customer base and revenue by approving the potentially great loan applicants rejected simply due to lack of credit history: first-time borrowers, millennials, migrants. To eliminate credit risk, it is possible to set up the algorithms for lender to get instant notifications when the situation changes substantially. By receiving alerts, the lender gains the opportunity to act preemptively (e.g., to restructure the loan conditions), before the borrower actually defaults on the loan. Some lenders can even offer subscription-based services, automatically detecting when users are paid below the average level and bringing their financial state back to normal.
Credit scores done smarter, faster, better
With the new technology and opportunities related to access to valuable data coming with open banking, credit bureaus have a chance to transform their business processes and make their services more up-to-date in the modern world of digitalization. Currently, credit bureaus have two problems leading to one sad result – credit score numbers are not fully representing the applicant’s financial situation. The first problem is credit evaluations being based on insufficient and outdated customers’ information. The second problem is actually the lack of data – due to some banks not reporting customers’ credit activity, as it is a costly and complicated procedure. Automatic aggregation of bank data from multiple sources will help credit bureaus solve these two problems and provide better services as their calculations will be more precise. This is the way to go for credit bureaus if they plan on retaining their customers, attracting others in the future.
Landlords sleeping tighter
Usage of bank data aggregation is not limited to the financial industry only, its potential use cases are practically endless. Take landlords, for example: if they want to gain confidence in their future tenants, next-generation assessment processes will help them make informed decisions. By having access to open banking data, they can analyze candidates’ financial behavior and see how stable their financial situation is, including loans, income, expenditures, and other transactions. But it is not all, accurate bank information that comes right from the source makes the identity verification process much easier. Landlords can be sure that tenants are who they say they are by instantly confirming the personal information from the application. As this information is collected directly from the bank, no intentional modification or falsification is possible.
Now’s the time to be bold and seize the day – any company has an opportunity to join the open banking movement and derive the benefits of bank data aggregation. If a business wants to be on top of the stack, it is the right moment for offering valuable insights and innovative products, tailored to the individual. Having access to open banking data proves to bring so much value, and yet, even today it is not that easy to gather it – that’s why most financial institutions prefer to work with an experienced technical service provider for this purpose. In our knowledge-based economy, data is the new oil and it is important to mine it properly and with the best results.
About Salt Edge
Salt Edge – a financial API platform with PSD2 and open banking solutions. The company has two main vectors of activity: enabling third parties to get access to bank channels via a unified gateway, and developing the technology necessary for banks to become compliant with the directive’s requirements. ISO 27001 certified and AISP licensed under PSD2, the company employs the highest international security measures to ensure stable and reliable connections between financial institutions and their customers. The company is integrated with 3800+ financial institutions in 70+ countries.
More information: www.saltedge.com
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