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Open banking is a lender’s best friend. Here’s why!

Abílio Rodrigues
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Last editedMay 20232 min read

There is a lot of room for improvement when it comes to current lending processes, both for consumers and businesses.

Open banking can, however, minimise these issues through account information services (AIS), accelerating decision-making by tapping into accurate financial data provided by state of the art banking APIs.

Payment initiation services (PIS) based on open banking can also help, lowering transaction fees, and saving costs that can be channelled to improving business operations. 

For businesses, traditional sources of information — like credit bureaus — do not allow an accurate assessment of an applicant's current financial information. Additionally, companies rely on information provided by the client for credit checks, and have no alternative but to trust that they do not try to dodge some hard questions.

For consumers, applying for a loan or credit means a lot of time wasted in bureaucratic procedures. If a mortgage or working capital facility is what you need, finding all the statements to print and file can prove difficult, besides having to wait for the bank to make a definitive decision.

The amount of manual work needed to get approved is overwhelming, and contributes to slow down the process. This is true for all parties involved.

In the end, lenders are unable to provide the best service possible, and have a hard time meeting customers’ expectations. But smart business owners know open banking powered solutions can change this.

Account Information Services: faster and safer loans

Open banking services like bank account data can access financial information directly from banks, through secure APIs. This information can then be organised and expose patterns like spending habits and transaction data.

Enriched data allows lenders to offer personalised loans that cater to the specific needs of a business or individual. Account information services can even automate lending processes, with three main advantages for all parties involved:

  1. Faster and safer processes: data is shared in real-time, accelerating decision-making and approval;

  2. Accurate risk assessment: access to relevant information improves analysis and meets customers' expectations, and companies’ needs;

  3. More satisfied customers: if a process is convenient and reliable, everybody wins. Customers’ get what they need, and businesses reduce risk and multiply revenue;

Payment Initiation Services: no more fees

One of the biggest bottlenecks to a smooth lending process are the transaction fees associated with each payment. Lenders usually accept card payments or direct debits from consumers, which opens the door to considerable sums being taken out of their pockets.

Open banking sustained payment solutions are the obvious counteraction to this issue, dramatically reducing the amount lenders pay when they receive their rightful repayments. Here are its main advantages:

  • Increased consumer choice

  • More efficient lending processes

  • Faster and safer transactions

  • Savings that can be channelled to other business ventures

If saving money is very important, faster transactions are certainly not a secondary benefit.

Open banking payments remove middlemen from the equation, as they are bank-to-bank oriented. This operation improves not only the reconciliation process, but it also ends delays in receiving payments.

The advantages are obvious for all parties involved: funds are instantly available on the clients’ account, and lenders can have a more granular and efficient control over their books.

Overall, open banking allows lenders to save money, increase revenue, decrease risk, and offer better solutions for their clients. If all that is not enough to you, consider this: the lending process is also fairer, because of factors like better data acquisition, real-time income verification and improved invoice settlement.

All of this has a great impact on peoples’ lives, as well as on a sustainable economy that understands effective lending as a powerful ally.

Open banking has already moved from being considered a compliance challenge, and has now become a great commercial opportunity — a new and improved way of delivering financial services.

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