Verifying your customer’s finances takes seconds through open banking

February 5, 2024
min read
Verify your clients finances through open banking and kontomatik

Financial information can tell you a lot about your client right off the bat, before you even decide to work with them. When you check a client’s financial condition, you assess exactly where their money goes, how they allocate their finances, and – importantly for your purposes –  what they’re capable of paying in the way of a loan or monthly mortgage or rent payments. 

Why do companies need to verify a client’s finances?

That information is a great tool for any lender because it gives you the information you need to determine whether to grant them a loan or another, similar service based on their ability to pay. If you do decide to go forward with granting them a loan, for instance, your deep understanding of their financial situation will allow you to adjust the loan or other service to meet their specific needs. For example, you could decide on a smaller or larger loan installment, or, if you’re leasing out equipment, a higher or lower deposit. 

That knowledge also gives you the ability to offer certain clients other products or services they may not have considered, thus boosting your own revenue. And, importantly, when you know the  financial capabilities of your customers, you can offer additional products at just the right time.

How can clients' finances be verified?

There are a few ways to verify customers’ finances, starting with the methods that were more common – and also more tedious – prior to open banking

  1. Customers can make a 1 PLN or 1 EUR transfer to an account. Then the third party receives the customer’s financial information from the bank.
  2. Another option is obtaining a paper bank statement, a process that requires customers to download PDF statements and manually upload them or bring a physical copy to the third party for review
  3. Credit bureaus can collect and provide data on bank customers. Then, loan companies, banks or other institutions can use it to check clients’ credit history, solvency and reliability.
  4. All of those options have downsides, primarily in the time, effort and cost they take to complete. But open banking presents a fourth alternative to verify your customer’s financial information.
  5. With open banking, customers can request that their information by an Account Information Service Provider like Kontomatik, gets sent to a business that wants to provide a loan or any other service. The whole process takes a matter of seconds, a few clicks, and no one has to so much as exit their browser window.

TWO main benefits of open banking for your clients 

Many clients find open banking to be a refreshing alternative to other methods that allow them to share banking information, largely due to its efficiency. One of the biggest draws for clients is how the banking verification process is completed entirely online under open banking. That means there’s no need to gather paperwork or request PDF or paper bank statements because it’s all done in a few clicks. 

It also means the time it takes to complete the process is a lot faster; in fact, it’s just a couple of seconds. For most clients, that’s a much better alternative to previous, time-intensive processes, which required clients to visit the bank or branch of the company whose services they wanted to use or to download documentation, which would then have to be uploaded to other systems

Despite the different perceptions, the act of sharing information is secure under open banking. Companies providing account access services are authorized by the relevant authorities. For instance, Kontomatik is authorized by the Financial Supervision Authority called KNF in Poland and by the Bank of Lithuania, meaning we follow all their safety protocols. Additionally, such companies operate under the PSD2 directive, which has stringent security measures - highlights Alicja Łosowska, Compliance Manager at Kontomatik

Open banking gives businesses an edge

Using open banking tools gives many companies a competitive advantage because it allows you to offer clients a quick, safe and painless way to transfer their financial information. An attractive thing about open banking for many businesses is that it’s entirely online. 

When your business works with Kontomatik, you get our widget, which clients use to access and verify their financial information, embedded on your website. That means the client can complete the entire verification process on your website or application. It also means there’s no need to upload document scans or make bank transfers, because the whole process happens through the browser”- says Dominik Wolski, VP of Business Development at Kontomatik.

Open banking can also reduce the risk of fraud or information tampering because the information goes straight to Kontomatik before it gets to your company, meaning there’s no risk of an individual altering their information before passing it on to you. 

The information a business does receive through open banking is much more in-depth than before. Rather than just the basic information on a client, you can receive information on things like their transactions, their liabilities, and where they frequently spend their money. In short, you get a very detailed picture of your clients’ spending habits. That picture allows your business to make more well-informed decisions about, for instance, offering a loan to a certain client. 

Overall, the process offered with open banking is fast and simple, making it desirable for many businesses. 

A real example from the market 

One company that has seen the benefits of open banking is Smartney, one of the fastest growing fintechs in Poland and a leader in the sale of consumer loans. The company works with Kontomatik to verify its customers for loans. Smartney found that, with open banking and data provided by Kontomatik, customer identification took an average of seconds. They also found that 67% of their customers chose the open banking method to verify their data out of all available methods. 

Katarzyna Joźwik, General Manager at Smartney emphasizes the advantages of using open banking and cooperation with Kontomatik

Kontomatik's advanced data science tools have allowed us not only to identify customers more quickly, but also to improve the credit verification process thanks to its open banking solutions.  Our customers are satisfied with the solution.

Open banking has far-reaching benefits for both customers and companies, and it can give any business a great edge over its competitors. More businesses should consider implementing open banking practices into the process of onboarding and verifying their customers. 

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