How Open Banking Data is Transforming Financial Services

Explore how open banking is reshaping finance, offering unprecedented opportunities for innovation. Discover the global impact of data sharing in finance, the strategic moves by big tech, and how Yapily can support you with open banking data.

Data is one of the most valuable commodities in this digital age. It unlocks huge potential for personalised commerce, better oversight of financial health and is at the heart of the breakthrough in open banking. In this blog we explore the opportunities and benefits that can be created with financial data and why consumers are only just beginning to see the initial benefits.

The data mandate

In the European Union, the United Kingdom, South Korea, Australia, and India, governments mandated that large banks open their customer account data for third party access. In Europe, the move was part of the Payment Services Directive 2 (PSD2) regulatory change. The objective was to stimulate competition and improve customer experience in the financial services market where traditional banks had held a monopoly.

It is a different situation in other parts of the world such as the United States and China when open banking and data sharing has not been mandated and is a market-led movement and companies are establishing open-banking relationships among themselves.

Overcoming legacy challenges

The financial industry often grapples with legacy systems and restricted access to historical data. Yapily, as a technical open banking infrastructure platform, tackles these challenges head-on. With solutions like AIS (Account Information Service) for validating balances and direct debits, Yapily ensures more transparent and efficient financial operations.

What data can be used and the benefits

It is important to note that the data being accessed relates to the customer and their transactions data such as history, account balances, and payment details – it is not the payment itself.

This real-time data can be used by PSPs to create a more holistic overview of their customers’ financial circumstances. This can include affordability and credit rating checks as well as KYC and KYB checks.

As a result, customers could have a better chance of being granted a mortgage, loan or access budgeting tools. They can save money and access financial services from which they may have been previously excluded. Read on for a better understanding as to how open banking has been transformative for the lending industry.

Payment service providers (PSPs) and financial institutions can quickly, and confidently, serve more customers, as well as achieving stronger compliance. Not yet convinced? Why not discover 10 reasons why PSPs should adopt open banking, including mitigating fraud risks and real-time transaction visibility.

Open banking as a force for good

Amid the significant advantages of open banking, it’s natural to have concerns about data security and privacy. Yapily’s approach to open banking, underpinned by robust regulations, offers reassurance in this regard. Financial institutions, along with third-party providers like Yapily, are bound by stringent security protocols and must secure explicit user consent prior to accessing any financial data. Yapily emphasises not just compliance but also the strategic use of encryption and advanced data protection methods.

This commitment to security is designed to protect sensitive information, fostering a trustworthy and secure open banking environment. As a result, businesses can leverage Yapily’s secure data channels to enhance their services, confident in the knowledge that they are operating within a safe and regulated ecosystem, where customer trust is paramount.

We’ve given you a comprehensive overview into security and open banking, which should answer any questions you may have about how it solves these challenges.

Open banking, championed by Yapily, is more than a technological advancement; it’s a force for good. It plays a critical role in areas like:

  • Anti-Money Laundering (AML): Enhancing the ability to detect and prevent financial crimes.
  • Fairer Lending Practices: By accessing comprehensive and live data, Yapily facilitates fairer, more informed lending decisions.
  • Data Enrichment: Offering enriched data insights, Yapily helps businesses understand their customers better, leading to more personalised service offerings.

Dive deeper into the good that Open Banking data brings to businesses and their consumers.

Yapily’s open banking data solutions

Let’s take a closer look at how Yapily’s open banking data solution can bring widespread benefits to your business, in just a few clicks:

  • Validated Direct Debits: By leveraging Yapily’s capabilities, businesses can confidently validate direct debits, ensuring transactional accuracy and reducing the risk of defaults.
  • Quick Merchant Onboarding: Historically, onboarding merchants has been fraught with friction. Yapily’s configurable hosted pages solution streamlines this process, enhancing accuracy and execution speed.
  • Tailored Solutions for Complex Business Cases: Yapily narrows its approach to address intricate business needs, especially in sectors like lending.
  • Lending and Data Enrichment: With the enrichment of data through partnerships (like with Ntropy), Yapily strengthens its capacity to offer detailed, reliable transaction histories. This is crucial for a robust credit assessment process in lending.
  • Comprehensive Account Connectivity: Yapily’s platform connects to all account types offered by each bank it works with, providing a complete and dynamic data picture.

Big tech and the AI factor

Generative AI has the potential to elevate currently available data and transform spending insights. There is already a huge amount of data available in banking such as transaction behaviour, spend categories, account balances and more that can improve the customer relationship. This can fuel generative AI, but only with a sufficiently large dataset.

Furthermore, there has been much discussion and speculation about how big tech companies are or might be using customer data.

Apple holds an Account Information Service Provider (AISP) and acquired a UK open banking company in 2022. This FCA-regulated credit reference agency now gives Apple access to both open banking data and credit data from banks.

With customer consent, Apple can now access the bank account data of businesses or individuals and use it within their suite of data modelling and analysis tools including their data classification engine or insights engine, proprietary risk models, and other income and identity verification tools.

That’s not to mention what Apple might do using AI tools.

Ultimately this is likely to be a case study for how data can be assembled, processed and analysed through the properly authorised and connected routes so Apple will have the ability to make the most timely offers and best possible decisions regarding financial services for their customers.

The positive impact of data sharing is not limited to financial services.

Another great data sharing case study was cited by Open Banking and featured the energy data initiative IceBreaker One, developed to create a trust framework that would allow stakeholders to share a variety of energy-related data. The initiative’s focus was on enabling organisations to share data to retrofit a housing estate to improve energy efficiency and reduce costs for the community of people living in those houses.

Looking to the future

The launch of open banking has awakened and heightened awareness of the potential and benefits of data sharing. It has already unlocked fresh competition in the financial services market and given customers access to vital services from which they may have previously been excluded. We are excited to see how this will be further strengthened with the introduction of generative AI.

Big tech firms are well-aware of the potential for data management and sharing and have the resources to align capabilities to maximise its commercial opportunities.

Ultimately, open banking and its underlying ethic of data sharing is a force for good and we look forward to seeing how its positive impact continues to help communities, regions and the UK as a whole.

Next steps with Yapily

Yapily is not just reshaping the present; it’s paving the way for the future of financial services. With its focus on overcoming the challenges of legacy systems and providing transparent, accurate data, Yapily is setting new standards in financial data management and utilisation.

So, is now the time to harness the full potential of open banking for your business? Yapily’s team of open banking experts is here to guide you through the myriad of possibilities our data solutions offer. Whether you’re looking to streamline your financial processes, enhance your data strategy, or explore innovative lending solutions, our experts can provide tailored advice to meet your unique business needs.

Book your consultation today!


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