4 Open Banking Use Cases Driving Digital Transformation

Open banking is changing completely the way we think about financial services. If you read this blog, you probably know that already, as it’s one

Open Banking Use Cases

Open banking is changing completely the way we think about financial services. If you read this blog, you probably know that already, as it’s one of our favorite topics to research and inform you about, given the critical relevance for all the companies operating in the finance industry. 4 Open Banking Use Cases Driving Digital Transformation.

This time we look at four specific open banking use cases that we think are particularly relevant for you to know, as well as what’s next with the open Finance API Framework announced by the ‘Berlin Group’.

Open Banking Use Cases Driving Digital Transformation

1. KYC Process Acceleration

Know Your Customer (KYC) procedures are part of the client onboarding process and include all the required actions needed by banks to help prevent and identify potential illegal activities – e.g. terrorism financing and money laundering. Practically speaking, the KYC process is composed of various steps that include ID card and proof-of-address documents verification. Thanks to PSD2 compliant open banking APIs, it’s now possible for financial institutions to dramatically accelerate the speed for such time-consuming procedures and reduce the compliance costs by automating a large percentage of the process.

2. Customer Identity Verification

3. Personal and Business Financial Management

Open banking makes much more interesting what’s possible to offer customers in terms of personal and business financial management. It allows increasing customer engagement with data-driven insights and by providing an aggregated view of all their accounts in one single application. This new opportunity for banks to analyze vast amounts of financial data in real-time allows them to offer clients a customized experience with personalized insights and suggestions.

4. Credit Risk Scoring Algorithm and Calculations

Thanks to APIs, account aggregation, and the use of algorithms with machine learning, open banking allows financial institutions to radically improve credit scoring by making it faster, more efficient, and even safer. It is now much easier to integrate it as an additional service on top of an existing commercial offer, giving the possibility to quickly calculate clients’ credit scores based on their income, loans, and aggregated accounts.

But that’s not all. If a lot in financial services have already been transformed, many more changes will come in the future. On top of Open Banking UK and Revised Directive on Payment Services (PSD2), it’s what the ‘Berlin Group’ is doing that we find of particular interest.

The ‘Berlin Group’ is a European coalition of banks and Third Party Providers (TPPs), including both Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs). The companies part of this group are working on payment interoperability standards and harmonization initiatives to define an open and standard scheme. In October 2020, they announced the open Finance API Framework, planned on top of the prominent NextGenPSD2 interoperability framework, designed to give TPPs, API access to bank accounts.

Based on open industry standards such as REST, JSON, and ISO20022, the new open Finance API Framework will offer a harmonized and interoperable set of APIs, allowing banks and TPPs to provide enriched and enhanced data, products, and services.

If you are interested in exploring the global movement of Open Banking and its benefits further, all you need to do is to contact Jurcom GRC Services and we will guide you on this long path safely.