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Open Banking has started to revolutionize the fintech and banking industry across the European Region. This new form of banking under PSD2 has changed the banking industry to be more customer centric and has offered the potential to get a grasp on a customer’s finances with much ease.

Beginning this year, the banks in European region started to build APIs in order to shared customer’s data with the third-party providers. The right to sharing data has been given back to the customers of RBS, Danske, Lloyds, etc. banks and the customers can share their data with whom they want. Lenders, financial advisors, and insurance providers can ask for this data to develop services by partnering with AISPs.

Ease in Credit Process

With the help of Open Banking data, the lending industry is now able to quickly process loan applications. A consolidated bank account information is available via Open Banking. This information can easily be utilized to cross-check income figures, affordability check, interest rates decisions, and deciding which borrowers are eligible for loans.

Lenders already utilizing Open Banking data are going to have an advantage moving forward. The banking transaction information are not available to all and with this information now being available the lenders can test innovative lending models.

Lending enterprises have partnered with FCA-authorized AISPs and have started to use transaction data into applications and lending risk models. AISPs have been able to add an Open Banking button or link into lender’s web application and will empower borrowers to share their transaction history.

Lenders will be able to quickly analyze that information and decide whether or not to disburse loan to the borrowers to near-prime or thin-filed borrowers.

Affordability and Income Verification Process

The Open Banking Data can also be utilized to complete identity check from user’s bank. The identity information when added with the income analysis enables a new technology to be a self-reliant tool for KYC/AML processes. Any company that needs to understand sources of wealth or to verify identity can benefit from exploring Open Banking.

Rather than collecting pay-slips or copies of customer’s bank statements, the lenders are using Open Banking to move income verification process online. The process has sped up and the time between applying for loan and disbursement of loan.