Two years after the introduction of the PSD2 directive, which effectively launched the Open Banking season, it is time to draw the first conclusions and above all, to analyse the new opportunities arising from its growing adoption.
Under the banner of the highest transparency and interoperability, Open Banking has rapidly unveiled its benefits, particularly with regard to the acquisition of new customers. With leaner and more effective processes – the rate of prospect acceptance has tripled, the risk of loss has halved. Most importantly, an improved understanding for both potential and existing customers of the significant risk reductions, increased targeted upsells and efficient resource allocation. While this approach was initially adopted by start-ups and fintechs, disrupting the international banking market, more organisations are now exploring the world of Open Banking. They are convinced about the added value that openly shared banking information brings at various levels. The Forrester research has shown that 42% of Dutch businesses have already invested in Open Banking and 49% plan to do so in the future.
“With an accelerating shift towards digital banking and more people turning to cloud applications, Open Banking for SMEs is likely to rapidly increase in 2022. Early adopters of the system will become increasingly advanced and, in return, have a competitive advantage. Additionally, we will likely see more lenders improving customer experiences and decision-making via PSD2 possibilities.” – Herman Peeters, Principal Consultant at Experian Netherlands
The initial benefits of Open Banking are currently well established, and the assessment of the creditworthiness of consumers and businesses has reached remarkable levels of accuracy. There are numerous additional benefits that Open Banking will enable in the future, including:
- A more effective early warning system to identify potential credit risks at an early stage using predefined indicators;
- Employment verification, where it is possible to leverage the exceptional accuracy with which salaries are classified;
- A holistic analysis of income, thanks to the possibility of generating valuable indicators on the regularity, volatility, and robustness of income, both as an employee and as a self-employed person.
As Alessandro Cirinei, Open Banking Product Lead, EMEA at Experian, explains: “At an international level, Open Banking is undoubtedly a revolution in the industry, as shown by the early feedback from the fastest adopting markets, such as the UK and Nordic countries. With its global vision, Experian is playing a leading role in this transition. The ability to access large data assets automatically and immediately, with full transparency and respect for privacy regulations, allows market players to operate more effectively and efficiently.”
At the heart of all of this lies the increasing attention to the quality of the available data, which is weighted and analysed until it goes beyond pure statistical value, and represents solid insight for business decisions. And ultimately, end users will benefit from businesses who operate more effectively, as they will be able to be assessed more realistically and more comprehensively. Consumers see the value in sharing their data, and are therefore willing to do so. The Forrester survey indicated that 42% of Dutch consumers are willing to share their data and 35% would be willing to do so for the right value exchange, like a faster application process.
The initial results are there for all to see. More positive aspects of Open Banking will reveal themselves over the next few seasons as the real interconnection between the different realities increases and becomes more widespread.