Learn about some of the use cases and benefits that open banking and open finance solutions offer to banks and the potential they can extract by implementing these models.
When talking about Open Banking, we often talk about the benefits that these new models offer to fintech companies, thanks to the possibility that opens up for them to connect to their users’ financial data.
However, experience in markets such as Europe and the United Kingdom shows that banks are also major beneficiaries of this transformation.
The first of the benefits is gaining a 360° view of customers’ financial lives. Through the aggregation of data from multiple sources, extracted through Open Banking, banks will be able to better understand their customers’ current needs, as well as their behavior and financial health. In addition, the availability of this type of information generates new analysis and enrichment possibilities that give banks more information about their customers.
Having clients’ financial information “in one place” paves the way for offering a wide range of new services, such as new PFM (Personal Finance Management) platforms or the ability to segment and offer personalized services.
Another benefit is access to new audiences thanks to the diversification of financial information. Access to data from alternative sources, such as tax, e-commerce or delivery platforms like Uber or Rappi, provides the opportunity to offer products and services to users who are outside the traditional financial system or who are just starting their journey in financial life.
One of the main ways to achieve this is through the embedded finance model, which allows financial services to be inserted into third-party channels thanks to connection via APIs. These models make it possible to reach a larger number of customers through personalized offers at a low acquisition cost.
Besides embedded finance, another service that represents a growth opportunity for banks is “Buy now, pay later“, which offers credit services at the checkout of digital platforms such as e-commerce, retailers, airlines and others.
In addition to all this, open banking offers the golden opportunity to add positive data to existing risk models. When we talk about positive data, we are referring to all the information that customers provide on a day-to-day basis and that is especially relevant when, for example, taking out a loan to buy a home or for those who do not have a credit history.
By analyzing the relationship between income and expenses from transactional information extracted through Open Banking models, it is possible to build risk profiles more representative of the actual financial behavior of customers in their daily lives, beyond their credit history.
In this way, more people would be able to access financial products and the huge gap in financial inclusion that still persists in Latin American countries would be closed.
If you want to learn more about the use cases of open banking for financial institutions, we invite you to read the following report.
