The Ultimate Guide To Open Banking Use Cases

Open banking offers a variety of benefits to banks and financial institutions. It expands and diversifies their digital offering and allows them to develop a range of different products at an accelerated rate.

Many banks now have key areas of open banking that are worth paying attention to. Investing in various aspects of open banking can have a huge upside. However, before diving into the most popular use cases, here are a few insights on the fundamentals of open banking.

What Is Open Banking?

Open banking allows financial institutions and banks to more easily access information about customers’ finances. Data exchange is made possible through APIs, or Application Programming Interfaces. This set of programs helps banks and financial institutions communicate with one another. 

The purpose of open banking is to improve existing services and create new ones, which can reduce costs or generate revenue. All of which are closely linked to different financial products. 

What Are Some Of The Most Popular Use Cases In Open Banking?

Account Aggregation

A number of financial service providers offer account aggregation, which involves using APIs to give customers an overview of their various accounts.

Customers can see accounts from different providers on a single interface when account aggregation is in place. In addition to payment accounts, the PSD2 framework gives access to credit cards, investment accounts, loan accounts, as well as combining consumer and business banking in one interface.

Personal Finance Management

The emergence of open banking has of course brought new possibilities to financial management and wealth management. However, open banking has unlocked some capabilities within a PFM. Similarly, when a bank is connecting APIs within different business units and connecting them to APIs at other banks. There has been a proliferation of financial management products as a result of open banking, giving customers more choice, and offering providers the opportunity to offer tailored products.

Instant Credit Risk

As a result of open banking, lenders can receive an almost instantaneous overview of an applicant’s credit history. Traditionally, assessing applicants for credit involved gathering documents from different banks and institutions. Credit services were not only slowed down by this process, but the customer experience was also negatively affected by it.

Subscription Management

It is still quite new for subscription management services to complement account aggregation and PFM. Creating insights and taking action is part of this feature. An interface for subscription management is used to list all customers’ recurring payments, such as monthly utility or mortgage payments, streaming services, fitness memberships, etc. The customer has the option of managing recurring payments here, for instance to cancel unwanted subscriptions or get notified when a payment is due.

Opening New Accounts

Opening a new account with a bank has become easier and faster thanks to open banking. Open banking allows banks to exchange data in order to match information such as an address, occupation, income details, name and date of birth as well as credit history.

Since this is possible in a matter of minutes, the opening experience for customers is much smoother – and suddenly this has become a competitive necessity. For some segments of the population, opening an account through digital means is their first experience with the bank online, so they may have high expectations of speed and user experience.