Ensuring the best customer experience is a major problem for financial institutions that are building an instant lending channel or a digital on-boarding journey.

Adding Open Banking is sometimes perceived as an obstacle for the user and a limitation that might have a negative impact on the conversion rate. In this article we explain why that perception is not correct and why open banking is not only a fantastic opportunity to collect meaningful data to assess creditworthiness, but also an effective way to optimise and improve customer experience.

1) Open Banking is a seamless process.

In Europe, on average, 60% of the users that start an Open Banking process end up providing consent to allow the financial institution to collect their data. This percentage has been growing over the past year as many of the major banks adopted Open Banking and positively contributed by educating their customer base.

This process only takes three minutes to complete and includes four steps.

  1. Selection of the bank
  2. Consent page
  3. Strong Customer Authentication
  4. Fetching of the transactional data and final “thank you page”

It is important to build a totally seamless flow, support the user with helpful contents and graphic elements and eventually adding a live video chat with a view to communicate that the completion of the process will provide a faster process and increase the chances of receiving the loan. According to our experience, 55-60% of the applicants that initiate an open banking journey successfully complete it. Although PSD2 is still in the early stages and the open banking ecosystem is not fully mature, the results are promising and can only get better!

 2) Open Banking reduces bureaucracy and helps with identification of the prospect

The strong customer authentication is crucial in ensuring that the prospect is able to access the current accounts submitted. Additionally, it is possible to extract and check the IBAN, eventually adding up services to validate the association to a VAT number or a fiscal code.

The European Banking Authority also recommended banks to add the name and surname of the account holder(s) as part of the information to be submitted via the PSD2 API.

The number of banks complying with such recommendation is growing and soon it will be possible to validate the association between an IBAN and the name of the applicant.

 3) Income and employment verification reduces the time to say “yes”

The historical depth of the transactional data that can be provided through Open Banking enables the lender to easily verify the disposable income and the affordability. It is possible to ensure whether the applicant is currently employed or a sole trader and design cut-off strategies based on his or her net income as well as on KPI based on the past evolution of the balance.

The income and the employment verifications are part of a lengthy process which requires the user to add additional documents such as the salary slip for the consumer or the cashflow statement for a company. Without open banking, these documents require a costly manual review from the lender.

Reducing the time needed to complete the process has a positive impact on the customer experience and significantly reduces the on-boarding costs.

In conclusion, Open Banking is not an additional step that might prevent the user from reaching the end of the process but an innovative way to accelerate it and collect a wealth of powerful information about affordability and spending behaviour.