Open banking in practice

Open banking in practice

Open banking means access to customer data, which unlocks new opportunities for business development and process improvement – not just for banks and fintechs.
How to leverage these opportunities?

When the open banking regulations entered into force in the European Union (PSD2) and the United Kingdom (Open Banking), they caused quite a stir on the market. Financial services have become faster and more accessible to all businesses, and the market has opened up to new types of products and services.

What Open Banking changed in the finance sector

PSD2 and Open Banking have given European consumers and SMEs a control over their financial data that used to belong almost exclusively to the banks managing their accounts. Passing on this data or making it available to third parties is no longer a lengthy bureaucratic process as it used to be.

Processes that once took minutes, hours, or even days can now be initiated almost instantly. They have become cheaper and safer, and consumers have also gained new opportunities to manage their finances across different banks and accounts.

Open Banking directives give verified third party providers (TPPs), such as our Whizzapi platform, two basic options:

  • AIS – Account Information Services: Access to information about the customer’s account, its balance and transaction history as well as the ability to confirm the customer’s identity.
  • PIS – Payment Initiation Services: The ability to initiate payments immediately and directly (without relying on credit cards or services such as e-wallets or consumer loans). 

With these capabilities and newly available data supported by safe and standardized technology, a whole range of benefits are now available to both consumers and businesses.

Open Banking benefits for consumers

Open banking helps consumers make informed and hassle-free financial decisions. They can use Personal Finance Management (PFM) platforms, which allow them to take control of their spending, saving and investing, with features like:

  • Monitoring their monthly budget, bills, loans and credit card fees;
  • Managing recurring subscription fees;

With open access to customer account data (Account Information Services), consumers can use various platforms for:

  • Easier and faster transfer of their accounts to another bank (they do not have to provide extensive documentation and rely on the banks’ arbitration – access to the information needed for verification is possible via API);
  • Easier access to credit and loans that they could not get before. This was usually due to the lack of sufficiently documented credit history to meet the formal requirements for the loan. Now, thanks to open banking, banks and lenders can use the customer’s bank account history (e.g. bills, subscription fees, rent, debt history, credit card repayments) to quickly calculate credit eligibility.

Open Banking benefits for business services

The introduction of open banking had far-reaching, revolutionary consequences for both financial and non-financial companies. Giving non-banking entities access to a payment initiation service, account information, and the ability for verified entities (e.g. FinTech companies) to issue payment cards, has pushed competition and innovation in the banking sector, in which many incumbent market players have resisted change.

New, improved financial services

With API banking aggregators like Whizzapi, both financial and non-financial companies can provide:

  • Payments without intermediaries. Thanks to the open banking API aggregators, payments can be collected from the customer’s bank account without the need for a payment card, e-wallet services or payment processors (eg PayPal, PayU or Stripe). Payments via API are initiated or rejected immediately after receiving the customer’s consent, given the availability of funds on his account, The funds are then transferred to the merchant’s account at the time specified by the bank, just like a regular money transfer.
  • Briad access to recurring and postponed payments. Open banking allows companies to flexibly manage subscription models by creating their own recurring payment mechanisms. This can be used by different types of organizations: from streaming platforms, to rental services, to schools, kindergartens, and even local cooperatives. Another possible application of open banking is the introduction of the “Buy now, pay later” model (BNPL) without being dependent on external payment services such as Klarna or PayPo. This payment model has become a breakthrough in e-commerce by making it easier for customers to make purchasing decisions: they can order, check and return the items without having to pay for then in advance and wait for a refund.
  • Simplified financial risk assessment. Thanks to the access to information about the bank account, open banking API allows you to verify the customer’s solvency without the need to commission assessment reports from the bank or other financial institution.
  • Improved fraud detection. Open Banking API standards provide an additional layer of security for user authentication (eg 3DS or strong customer authentication). As account activity monitoring can now be automated, it also allows you to be notified immediately of suspicious activity and take appropriate action in no time.
  • KYC and faster and remote client authentication. In the past, many sensitive operations, such as opening an account or signing contracts, required customers to meet a representative face to face, to allow for identity verification. Thanks to open banking platforms, many of these processes can now be digitized and safely executed remotely, which was critical to maintaining business continuity by many companies during the pandemic. This digital revolution will continue to increase the availability of high-security services.
  • Payment reminders. One of the most common reasons why customers don’t pay their bills on time is not because they are out of funds, but because they have simply forgotten. Thanks to the account information services provided by PSD2, in the event of payment delay, you can check whether this is what actually happened and easily send the customer a payment reminder, streamlining your accounting activities.

Open Banking benefits for operational management

Before PSD2 came into force in the EU and the Open Banking regulations in the UK, all these advanced features required customers and businesses to coordinate procedures with a bank or financial institution that usually charged transaction fees and required tedious bureaucracy.

Now, thanks to open banking platforms (such as Whizzapi), non-financial companies can, with the consent of their customers, gain direct access to information about their bank accounts and initiate payments. All of this through a secure, regulatory-compliant protocol, transparent interface, and a data enrichment platform that each company can use to meet their own business and operational needs, such as:

  • Accounting, financial management and investments. Thanks to the open banking API aggregator, all of the above benefits can be used for factoring, portfolio management and as additional support for insurance decisions.
  • Personalization of customer service. The data enrichment platform allows you to create and manage customer profiles based on their bank account history, including transaction titles and recipients (Whizzapi also offers transaction categorization). This can be useful when deciding to defer payments, assigning account managers, personalizing marketing, or creating special offers for customers with a specific financial profile.
  • Financial continuity and expanded funding opportunities. With an Open Banking API aggregator such as Whizzapi, you can leverage Account Information Access (AIS) combined with a data enrichment platform to verify if a given customer can afford services on a regular and predictable basis, without the need to hire external credit analysis services.

Whizzapi provides a programming interface and secure, verified payment services that you can use regardless of your type of business to build your own basic payment system and even integrate it flexibly with other financial services if needed. A banking API aggregator can bring value regardless of the area of business ​​activity: to utility providers, real estate agencies, car rental companies, private schools or providers of other subscription-based services. It is a comprehensive system for authentication and secure payment automation, compatible with all banks in the European Union and Great Britain.

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