Open Banking benefits are transforming how consumers and businesses manage their money by enabling secure sharing of banking data with authorized third-party providers through standardized APIs.
Consumers are always protected and in the driver's seat regarding their information thanks to Open Banking APIs, and whether they want to grant third-party providers access is up to them. If they want to deny it, they can. No matter what, consumers are always in the driver's seat as to what they do and do not want to share and with whom. Furthermore, due to the portal access, an Open Banking account can hold multiple bank accounts, credit cards, investment accounts, and pension holdings to create a big picture. For example, where a consumer had to log in and out of various portals to see how much they owed in one account or how much they had coming to them to assess the big picture, Open Banking provides that universal answer from one site. It connects transactions standing orders and direct debits so that what is done on one end can be accessed on every other.
Budgeting and saving abilities stem from years of spending history processed by A.I. and machine learning to identify spending patterns and regular monthly expenses flagged with potential reductions. People are alerted when they're overindulging in a category or when anticipated overdrafts will negatively impact their balance. They'll receive predictions and suggestions for paying their bills. It's more than A.I. financial customer support helping people categorize transactions; it's A.I. that projects expenses and provides solutions to unwarranted payments.
Expense tracking and classification happen automatically as the software trains on your transactions and grows more accurate over time. It alerts you live when you're about to go over budget in one category. It smartly recommends how much you can save based on incoming deposits from history and steady expenses. It acknowledges steady monthly debits from subscriptions and alerts you to those that it assumes are lost on the app to allow you to cancel unnecessary or duplicate services that would negatively impact your budget.
Payments in real-time. Open Banking also equates to safer transactions via an encrypted API.
Where funds are transferred without ever involving a third party, only the PISP and its bank, the weaker financial data is not shared across various stakeholders but instead is contained to two institutions. Thus, studies and reports indicate consumer satisfaction with safer transaction methods via Open Banking as opposed to legacy systems. In terms of privacy protection, when it comes to two-factor authentication and encrypted messaging, it's more than that of a bank. When a member tries to access his account from another device, the system acknowledges that access attempt and, initially, offers verification challenges so that inquisitive hackers cannot proceed. There are body scans and identifiable biometric patterns that prevent breaches—but not excessively so. The software gives third-party vendors access only to what they need to operate and no banking information beyond that, thus adhering to the philosophy of banking information minimization.
Open banking services imply that financial information can be pooled and cash flow can be assessed and predicted before the fact. Rather than needing to manually go through data on various accounts logged on separate dashboards, all bank transactions across all accounts are pulled up on one screen, creating intelligence for the organization that was previously only painstakingly digitized. Moreover, where 15 hours of manual banking work is needed for transaction reconciliations, Finexer's platform for SMEs allows for this to be automatically processed through open banking data aggregation from various systems; this action takes 30 minutes a week.
Furthermore, tools that assess historical analytics determine what is owed on recurring invoices and track budgets versus what's due to predict needs so organizations can alter course before spending. One retailer, for instance, who had these integrations experienced a 30% increase in operational cash flow within four months. Similarly, tools that leverage machine learning provide notices for late payments to ensure cash flow doesn't decrease while Open Banking integrations allow for bulk payment initiation to reduce wait time on transactions.
Open Banking enables lenders to make lending decisions on customized lines of credit via cash flow instead of traditional transaction histories. For instance, Silvr determines a company's creditworthiness via transaction data, relying on AI for its underwriting loan approach, which allows Silvr to approve loans 40% faster than through the conventional process. Moreover, Silvr offers loans starting at 2.8% APR for eligible SMEs.
In insurance, Yapily employs spending data to obtain insurance, decreasing costs by 15-20% for low-risk clients. In addition, companies with foreign clients can utilize Open Banking through direct integrations for cross-border transactions, cutting transaction fees by 60% compared to sending money via traditional banks. The potential for lines of credit is also more favorable due to the accessibility of APIs— even without the history of borrowing, the chances of approval are 11.7% higher.
Open Banking improves customer engagement. For example, one cloud accounting platform integrates directly with Open Banking platforms to provide live bank feeds. Finexer's customers who use this tool spend 5 hours less per month on reconciliation—60 hours a year. Moreover, with timely and expedited payment and invoicing, payment control regulations compliance demonstrates a professional image to customers and suppliers alike—SMEs can show they're reliable.
One SME integrated its payment processing with its eCommerce platform. This allowed for 95% of customer chargebacks to be approved. This led to a 50% increase in repeat customers who realized they'd get their money back if something didn't go right.
Open Banking allows new payment innovations for enterprises—account-to-account transactions decrease cart abandonment rates by 40%. Companies that run a subscription model require direct debit APIs for seamless auto-renewals, decreasing churn rates by 18%. Firms that can see a customer's transaction histories can construct hyper-targeted deals, increasing conversion rates by 30%.
For example, Starling Bank is a mortgage provider that processes mortgages 50% faster because it automatically verifies employment and holdings via a banking API. Payment processing like Adyen can provide on-the-spot credits which improve customer satisfaction scores by 22%.
Open Banking enables legacy banks and fintech to collaborate to achieve innovative solutions. For example, the AI-driven fraud detection solution by Salv Bridge reduces fraud by 80% as real-time predictive analytics assess each transaction instantly. Fintech like Jedox use Open Banking to access data streams across previously siloed financial systems to feed into its predictive forecasting module for more comprehensive demand planning, which boosts results by 35%.
Legacy banks offer their customers the option to select "Pay by Bank" at the register through Open Banking, reducing the time spent waiting in line to pay by 50% while also reducing merchant processing fees. Newly formed companies like the equivalents of Airbnb and Uber need an Open Banking solution to assess dynamic pricing based on cash flow assessments, increasing their margin by 20%.
PSD2 mandates strong customer authentication and data transmission protocols, which results in a 61% decrease in successful hacks. For instance, multi-factor authentication (biometrics) and encryption secure data in transit. Fraud detection in real-time flags fraudulent payments before customers even notice—AI solutions like Hawk:AI remove 40% of false positives.
Regulatory compliance solutions can minimize KYC/AML efforts with 75% less time spent on manual investigations. Open banking fosters a connected marketplace—Fintech Galaxy's FINX Connect enables every bank/financial institution to assist with fraud, improving funds recovery by 80%.