Open banking relies on cooperation between financial institutions, usually traditional banks, and third-party providers. Through open banking, financial institutions and third parties exchange consumer data safely and efficiently. This communication is facilitated through APIs or Application Programming Interfaces. Open banking by using AISs essentially provides consumers with many benefits, but there are two examples of the most popular and well-established open banking use cases.
Personal finance management
It is safe to say that personal finance management is the most common example of use cases within open banking. First of all, through open banking account aggregation, consumers can get consolidated data from all their payment accounts, even if those are held on multiple payment service providers. By aggregating current accounts, savings, deposits, loan accounts, consumers can better manage their finances. Having centralized data gives users a clear picture of their financial situation. Also, a consolidated data dashboard helps other financial services providers get a clear view of what consumers would benefit from. With open banking, consumers can easily create a budget, monitor their spending, or get financial advice on how to best use their funds. All in all, using open banking to aggregate financial information from different accounts makes finance management a lot easier.
Open banking simplifies the onboarding of new clients for financial institutions by providing a safe and convenient way to verify account ownership and check transaction history. Open banking facilitates loan or credit applications by allowing lenders to gain a rapid and easily accessible overview of an applicant’s financial situation. Before open banking, checking the affordability for credit or loan was a slow and arduous process that often included gathering different documents from different financial institutions. Under open banking, lenders can get easy access to all consumer’s financial data and make the best decision for their clients and their business stability and reputation. With open banking, lenders can offer more appropriate products and services, while applicants can get more insight and understanding about loans and debt, credit scores, etc. Also, open banking speeds up the application process for various other financial services by automatically completing information for consumers and verifying account ownership without the need for users to upload documents manually.
Of course, the utilization of open banking stretches far and beyond these two well-known examples mentioned above. All in all, open banking provides empowerment of consumers and businesses with access to many beneficial services that help them make intelligent financial decisions.