Examples of open banking that support a better consumer experience

When discussing examples of open banking, the conversation often focuses on publishing data. Financial institutions use APIs to make their data accessible to the open banking ecosystem. These APIs support interoperability and competition. But incoming data is just as important as the outgoing data.

Recently, Axway partnered with Envestnet|Yodlee for a webinar to discuss unlocking the full value of open banking. Joined by Lisa Novier, Envestnet | Yodlee’s head of governance, risk, and compliance, we looked at open banking use cases that show how data consumption helps banks drive customer engagement.

She cites a commissioned study conducted by Forrester Consulting on behalf of Envestnet | Yodlee, which found that a composite organization comprised of financial service providers and wealth management firms that used aggregation services from Envestnet D&A achieved an ROI of 416% over three years.

Here’s a glimpse into the key points and examples of open banking that were covered.

Consumers are willing to share their data for specific reasons

The majority of adults in North America are open to the idea of sharing their financial data. But in doing so, they expect a return. They anticipate banks to use this data to fuel a more personalized experience and better outcomes.

Consuming open banking data empowers banks to unlock new actionable intelligence that can help them better understand the personal financial needs of their customers. Banks also know which services customers are receiving from other providers. The insights pave the way for:

• Improving customer retention
• Streamlining onboarding processes
• Increasing cross-sell and upsell opportunities

What happens when you transition from using screen scraping to APIs?

Wondering what kind of impact open banking adoption can have on consumer engagement? Envestnet | Yodlee shared a case study during the webinar.

It all starts with the topic of screen scraping. When screen scraping is used to extract data, the quality of data access is poor. Incomplete or inaccurate data retrieval negatively impacts the customer experience. In turn, this can impact consumer decisions on where to bank.

As Envestnet | Yodlee has found that transitioning from screen scraping to APIs prompts an uptick in open banking adoption. The graph below shows the increase in user adoption that one of Envestnet’s companies experienced after this shift. The transition enabled better site reliability and eliminated multi-factor authentication issues.

Source: Envestnet | Yodlee

Open banking: a credit and lending use case

One of the use cases referenced in the above graphic centers on credit and lending. Let’s dive into the value open banking provides to consumers in this context.

The gig economy has grown fast over the past several years, making it harder for lenders to understand a consumer’s true cash flow and income. As a result, they have to look beyond the traditional credit score to make sound business decisions.

Whether it’s banking accounts or investment information, consumers can decide what data they want to share with a lender. A lender can then use this data to perform a cash flow analysis and determine if a consumer pays rent on time.

With this data fed into the decision-making process, a lender can feel more confident about approving or denying loans. Consumers, meanwhile, can get a better interest rate, or the added insights could turn a lender’s “no” into a “yes.”

Open banking is critical to the consumer experience

Capturing and maintaining a younger customer base can be challenging for a financial institution, but it’s critical: Gen Z (born between 1997 – 2012) will make up 27% of the workforce by 2025.

This customer group is less loyal to banks than their parents’ generation, and they’ve come to take convenience, agility, and digital services as a given. They want easy, uncomplicated access to their financial data anytime, anywhere. If they don’t find it with your bank, they’re inclined to move their business elsewhere.

Open Banking is a formidable opportunity for banks and credit unions to appeal to these customers by allowing them to access all their financial data in one place. This adds value to the customer experience and helps consumers lead better financial lives.