You might not think about open banking when you focus on services and products that make your life better. However, as of recently, in the UK and the European Union, the ability to use open banking data has made the financial and banking sectors much more consumer-oriented and efficient. Our goal for this article is to shine a light on how developers and the market use data, what data is gathered, and in what ways do they make ours, yours, and everyone else’s financial services of choice, better?
Open banking data for financial health monitoring
One of the most important responsibilities of a bank or credit union is to evaluate the true financial health of a client, before agreeing to lend money, lease a car, etc. Such requirements are in place because a person might be unaware of the financial risk that he or she might be putting themselves in. However, the standard way for evaluating financial health is to compare income against existing financial liabilities and their impact on your net income.
Doing that in the past was a bit challenging because if you took out a loan from a company that’s not your main bank where your other liabilities are open, you needed to procure statements and authorized documents from each and every financial commitment (liability) before being able to get another credit, lease, etc.
This took days or weeks, even. Now, thanks to the easy access to open banking data (https://nordigen.com/en/open-banking/data/), once the customer expresses consent, an automated API system can scan financial info from the past 24 months from all banks and auto-evaluate your credit health.
Personalized spending plans
The same exact service of gathering account information, courtesy of AISPs (Account information service providers) can help create personalized spending and budgeting plans. By auto analyzing your spending habits from the last 24 months and adding transactions in real-time, certain spending tracker apps can help create an individual budget just for you. Depending on your goals and aims, it can help you save money by shaving some needless spending or better allocate your income for goals or business.
Better terms for credit, loans, leases, etc.
This advantage is a direct result of the ability of the banks to better evaluate your financial health. Thanks to more insightful analytics and less manual labor needed to analyze an application, banks can now offer loans with better terms with more flexibility. They can take into account all kinds of income sources and present an offer the same day (usually, within 30 minutes). Because all of your data is accessible, they can offer better deals.
No need to overpay for the middleman
Thanks to open banking, you can now initiate payments through a variety of easily accessible APIs. The introduction of this model makes overpriced payment processing fees a thing of the past. If you remember, sometimes, when making international transactions, you could have to pay fees as large as 2-5% just for choosing to deposit money using your credit card or bank account. Open banking allows to drastically reduce commission fees or outright eliminate them.