20 open banking use cases you should know about

Access to data and instant payments was the catalyst for dozens of open banking use cases. But which ones drive real value, and how can businesses prioritise the ones to invest in?

Open banking has levelled the playing field for everyone. There are tens, if not hundreds, of examples of how open banking is being used. But, many providers still don’t know how open banking can help them, or better yet, how they open up new revenue streams. Here, we’ve compiled 20 use cases that are powering financial innovation across industries.

1) Identity verification

Around €5.7 billion is lost during the onboarding process. Why? Because financial services still rely on physical documents for identity verification. The paradox is that paper documents are riskier than digital credentials. In fact, they’ve contributed to a surge in identity fraud. But with access to data, companies can…

  • Retrieve identity information in seconds
  • Validate a customer’s source of wealth
  • Pull data to support fraud analysis

Which industries can benefit?

Financial services have the most to gain - particularly banks and lenders who still follow traditional verification processes. Wealth management can also leverage open banking to protect customer assets against sophisticated account takeovers.

2) Personal finance management

With every corner of the country feeling the effects of skyrocketing inflation, personal finance management has become a significant use case. Data aggregation enables companies to access and combine customer bank account data, providing tailored support with money management and actionable insights.

Which industries can benefit?

Personal finance apps are the vanguard of helping consumers and businesses take control of their money. Digital banks can also leverage account aggregation to deliver better money management tools. Outside of banking, accounting can facilitate streamlined cash flow management for businesses.

3) Payment reconciliation

Accessibility aside, spreadsheets weren’t made to hold a year’s worth of financial data. So, why do three million SMEs still use them? Open banking enables smart reconciliation by enabling businesses to see all of their transactions in one place.

Which industries can benefit?

Access to data unlocks new opportunities for accounting and bookkeeping. By aggregating data in one place, businesses and accountants can quickly resolve any discrepancies, rather than piecing together transactions like a jigsaw puzzle.

Customer spotlight: Crezco

Crezco offers their customers a quicker, more convenient checkout solution helping them get paid faster and safeguard their cash flow. This means less time chasing late payments. Crezco also provides greater visibility and clarity to its customers, and their customers, by providing certainty of payment and automating the reconciliation process.

4) Income verification

Whether it’s lending or renting, proof of income is at the core of a decision. It’s a lengthy process… particularly for those who are self-employed. In fact, business owners are twice as likely to be rejected for a mortgage. But with open banking, income verification is instant. No payslips, no bank statements, and no tax returns.

Which industries can benefit?

Lenders can bring income verification into the digital age with access to financial data. Aside from improving the overall lending experience, it opens up a wider pool of borrowers. Outside of lending, proptech firms can ensure tenants will cover rent payments on time.

5) Affordability check

Affordability is key for lenders, whether it’s consumer or business lending. But, when only considering a small snapshot of a potential borrower’s financial position, it can be difficult to understand real affordability. Open banking enables lenders to analyse financial data for up to two years, providing a clear and accurate affordability profile.

Which industries can benefit?

With access to financial data, lenders can make more informed decisions that are no longer based on a limited snapshot. Car finance providers can also benefit by pre-approving customers before they begin the application process.

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6) Creditworthiness assessment

While affordability determines whether an applicant can afford to borrow, creditworthiness looks at how likely they are to pay it back. Credit scores are a fundamental deciding factor. But, those three-digit numbers disregard millions who are still improving their finances. Open banking allows lenders to access real-time insights, so they can make more informed decisions about who to lend to.

Which industries can benefit?

Similar to affordability assessments, open banking helps lenders in all industries gain a clear understanding of an applicant’s creditworthiness based on real-time up-to-date data. So, lenders can have confidence in who they’re doing business with.

Customer spotlight: Salad Money

Salad Money eliminates the stress of borrowing with poor credit by offering in-application loan affordability and benefit checking services. Harnessing open banking, Salad Money is able to retrieve and analyse up to two years’ worth of transactions and spending data to provide NHS and public sector workers with an automatic review of their benefits and credit entitlement. Now, over £20 million has been lent to thousands of individuals.

7) Account top-ups

We pay by card for most things. But, card payments aren’t all they’ve cracked up to be. Take account top-ups, for instance. Depositing by card can take hours to be approved. But with account-to-account payments, settlement is instant.

Which indstries can benefit?

Crypto, wealth management and company wallets can all benefit from the security and speed of account-to-account payments for frictionless deposits and cost-effective withdrawals.

8) Invoice payments

Paper invoices haven’t gone anywhere, and they’re fuelling a late payment crisis among small businesses. Since invoices have always been paid by bank transfer, open banking payments are essentially an upgrade. The only difference is, they can be embedded into the checkout flow for a fast and frictionless experience.

Which industries benefit?

Open banking eliminates the physical paperwork involved with invoicing, which is common in the trade industry. Open banking also revolutionises invoice financing, a form of short-term borrowing extended by lenders. While it’s not quite there yet, open banking is predicted to become a popular mode of payment for utilities.

9) Payroll

Historically, it’s been impossible for businesses without a corporate banking account to bulk-pay salaries from the same bank account……until now. At Yapily, we recently launched our award-winning Bulk feature in partnership with Comma. Now, businesses can submit payroll from their phone or desktop in one go.

Which industries benefit?

Accounting can harness bulk payments to improve operational efficiency and offer new payment services to their customers. It also gives rise to accounting software and tools for small businesses to bulk-pay from their own bank account.

Customer spotlight: Comma

Comma saves finance teams around 77% of the time usually spent each month processing bulk payments. Through the power of open banking, Comma simplifies the complex bulk payments process, so SMEs can submit payroll at once from their existing business bank account. This automates the entire process to save the manual headache of entering individual details for every salary payment.

10) Intelligent savings

Having been mandated in July 2022, Variable Recurring Payments via sweeping are relatively new. But, they’ve already proved to be popular in helping consumers build saving pots. Considering 10.7 million adults in the UK rarely or never save, sweeping has the potential to help people break volatile borrowing cycles.

Which industries benefit?

Personal finance apps and digital banking can use sweeping to monitor disposable income and spare money in customer accounts. They can then automate sending that money into other accounts to maximise savings potential.

11) Smart overdrafts

The Financial Conduct Authority (FCA) revealed that nearly 13 million overdraw annually. But Variable Recurring Payments are making it easier for customers to pay off outstanding overdrafts by automatically transferring money from other accounts.

Which industries benefit?

Digital banking and personal finance apps can use open banking to monitor a customer’s overdraft status. When the customer enters a negative balance, money can be automatically swept into that account.

12) Refunds

E-commerce is booming and purchase volumes are mounting, but issuing refunds through card networks is challenging. It can take days - even weeks! - for consumers to get their refunds back. Now, merchants can use virtual accounts to collect local open banking payments and fulfil refunds on Faster Payments rails.

Which industries benefit?

Merchants and payment service providers (PSPs) can create multiple virtual accounts to collect payments and initiate instant refunds. This creates greater visibility over the payment status and more control over the flow of funds.

Read more on virtual accounts here.

13) Peer-to-peer payments

Until now, bank transfer has been the only way to send money to friends and family. But did you know that more than £700,000 is lost to bank transfer scams every day? With open banking, payments are so secure that fraud is out of the question. All customers have to do is select an amount, bank account, and recipient.

Which industries benefit?

Digital banking and money management apps can tackle bank transfer scams by leveraging open banking payments to make transferring money more secure.

14) Multi-banking

Multi-banking allows consumers (yes, you!) to view all of their financial accounts in one place. And since 1 in 3 of us has more than one bank account, it gives customers a holistic overview of their financial health. But, multi-banking does more than aggregate bank balances. Customers can also…

  • Make informed budgeting plans
  • Know when payments are due
  • Identify unwanted subscriptions
  • Spot fraudulent transactions

15) Treasury payments

Intriguingly, corporations still rely on manual processes to reconcile and manage company payments. With open banking, treasury teams can surface transaction data and make instant payments in one sweep.

Which industries benefit?

Open banking enables corporate banking platforms to help treasury teams make informed financial decisions, as well as establish automated processes around reconciliation, payroll and cash flow forecasting.

16) Subscription payments

The subscription economy is predicted to be worth $1.5 trillion by 2025, representing a significant use case for Variable Recurring Payments (non-sweeping). Unlike existing recurring payment methods that are clunky and prone to error, Variable Recurring Payments are smooth. And most importantly, customers are in control.

Curious? Learn more about Yapily Recurring Payments here, and how it compares to Direct Debit here.

Which industries benefit?

While non-sweeping isn’t yet mandated by the Open Banking Implementation Entity (OBIE), a pilot is already underway to bring this use case to fruition. For payment service providers (PSPs) and merchants offering subscription services, Variable Recurring Payments will undercut Direct Debit on price and improve speed.

17) Debt collection

Historically, debt collectors haven’t been known for taking a customer-centric approach. But, that’s about to change with open banking. By having secure access to financial data, they can easily identify vulnerable customers and adjust repayments accordingly. Moreover, customers can set up Variable Recurring Payments with full control over the payment parameters.

Which industries benefit?

For debt collection agencies, open banking payments are affordable and efficient compared to traditional bank transfers. Plus, they remove the reconciliation headache for payment teams when references are missing from transactions.

18) Point of Sale payments

Two-dimensional codes (a.k.a. QR codes) are becoming increasingly popular for making open banking payments in the physical world. Customers benefit from speed and security since payments are embedded with Strong Customer Authentication (SCA). Businesses benefit too, with no hidden processing fees and faster settlement.

Which industries benefit?

Payment service providers (PSPs) and merchants can benefit from the efficiency of QR codes and the security of account-to-account payments.

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19) Tailored insurance

Without realising it, many consumers and businesses are on the wrong insurance plan, or worse, uninsured. In fact, one in four UK households - that’s 6 million people – have no insurance. Open banking enables insurers to access buyers’ financial data, so insurance plans can be tailored to their financial circumstances. The result? Open insurance.

Which industries benefit?

With access to financial data, insurance firms can tailor plans based on a customer’s real-time financial position. What’s more, they can pre-approve customers before they begin the application process to reduce drop-off rates.

20) Loyalty programmes

While it remains an untapped use case, open banking has the potential to breathe new life into loyalty programmes. Interestingly, a fifth of customers don’t use their loyalty cards anymore, losing a whopping £257 in benefits every year. But with access to data, businesses can personalise rewards to foster customer loyalty.

Which industries benefit?

Merchants have a unique opportunity to gain insight into customers’ buying histories and personalise loyalty programmes based on real-life customer data. While retailers haven’t realised its potential yet, we predict it’ll become a hot use case in the future.

Get in touch to learn more about how Yapily can power your product innovation. Exploring your options? Check out our Open Banking Buyer’s Guide to understand how to vet providers and choose the best partner.


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