Open Banking has moved past the "what is it", early adopter, buzzword phase and into real-world use cases. Particularly in the U.K., five million people have connected their bank accounts through Open Banking.
There are a few reasons why Open Banking is growing. These include fraud prevention, automation, and speed. Additionally, it's an open standard.
Open Banking provides better fraud prevention. Since using Open Banking, fraud rates have been reduced by 7.5%, says James Varga of DirectID. Fraud enhancements aren't just for potential attacks by scammers; they are also for consumers who may try to exaggerate their information on applications. For example, a consumer may lie about their income on a loan application. When the application is connected to Open Banking, actual income information is used, preventing potential fraud.
Automation is another enhancement of Open Banking. Instead of entering data into a spreadsheet, Open Banking can bring data to where it is needed due to its API nature.
Banks and merchants with access to customer data via Open Banking can dig into structured data on spending. This allows banks to better understand the person's spending habits. Maybe they spend a lot on eating out. But if their income and debt commitments can't support this habit, the individual may be spending above their means. This type of insight provides information that might have otherwise not been visible.
When banks access credit bureau data, they analyze lagging data. Credit bureaus may not update consumer information for 3-6 months. Accessing an individual's information through Open Banking means getting the most updated information.
For consumers, this can mean credit card rates align more with their income and spending. Rather than a periodic credit bureau pull, a credit card company can access real-time financial data about consumers at any time and make rate adjustments as a result.
Banks and merchants are seeing the cost savings and benefits of Open Banking, helping to reach larger audiences.
Let Us Know What You Thought about this Post.
Put your Comment Below.