What are examples of open banking?

February 5, 2024
min read
examples of open banking

By this point, you’ve probably heard the term “open banking” – especially if you live in Europe (which is the hub of open banking).

You may have even used open banking tools without realizing it!

Over the years, open banking has gained steam around the world because it makes handling finances much easier. With open banking a user agrees to share their banking data with a particular company - the so-called third party (check our open banking dictionary here). 

This data, depending on the bank and their API,  includes transactions, account history and more. The bank, under a user request, must share the so-called third party (see open banking dictionary) that data and the third party looks over the information. This step often happens with help from a source , which can collect and read data for a company. That way, the company knows a little more about the user as they start working with them.

Even with a simple explanation, like that, it can be hard to identify open banking when you come across it.

But never fear! 

We’ve put together a list of 6 examples of open banking to take some of the mystery away from the popular practice. 

Here are 6 examples of open banking

1. Raiffeisen Digital Bank determine risk

One example of an institution using open banking tools effectively is Raiffeisen Digital Bank, which uses scoring models under open banking to help determine clients’ creditworthiness and risks associated with lending to them. 

Here’s how they do it: with help from an Account Information Service Provider (AISP), Raiffeisen Digital Bank analyzes a potential client’s banking history (with the client’s consent). The AISP goes through the client’s account transactions to determine things like spending habits, average account balance and more, before returning a single letter score (like a grade in school).

That score, on an A to F scale tells Raiffeisen how much of a risk the client is to lend to (with A being low risk and F being high).

Thanks to that scoring model, Raiffeisen has more complete information when deciding whether to work with a particular client, thus potentially saving themselves hardship and money in the future.  

For more on how lenders can use open banking to their advantage, check out our post here

2. Tink or Kontomatik provide financial data to other companies

While some companies use data to glean a better understanding of their clients, others, like Kontomatik or Tink help other companies to get, analyze and compile that data. This is another example of how open banking tools can be used. 

When a client agrees to share their banking information with a third party like a lender, for example, the lender often needs help understanding that information. That’s where AISPs come in.

A company like Tink or Kontomatik will act as an intermediary, getting the information from the bank and poring through it, compiling the data and assigning labels to transactions to make it more easily understandable. Depending on the lender’s needs, Tink or Kontomatik can also assess that data and determine the creditworthiness of the client before assigning the client a risk score. 

3. Revolut verifies financial condition

The Fintech giant Revolut is another company that makes good use of open banking to offer payment services including loans. Revolut works with an AISP to receive and assess client banking data like financial transactions and payment history (with the client’s consent, of course).

Open banking tools like labeling also help Revolute organize those transactions into easy-to-understand categories, making the process of assessing clients much faster. Using these open banking services to clarify a client’s financial footprint and payment history helps Revolut make smart, informed decisions on a potential client’s creditworthiness. 

4. Smartney checks identity

Another really popular way that companies use open banking is ID verification. With so many online services these days, it can be hard to tell if the person behind the screen really is who they say they are. Bad actors can forge documents or pose as someone they’re not. Open banking gets rid of this problem.

Thanks to open banking, a company gets ID information about the user (including their name, address and more). They can then verify that information with the user. That way they can make sure that the user is telling the truth about who they are. Many companies say open banking made ID verification a lot easier and faster.

One company, Smartney, turned it into an 11-second step

5. Simpl.rent verifies tenants quickly 

Another case showing how open banking simplifies day-to-day activities is Simpl.rent. The  Polish-British fintech has brought open banking practices into play when it comes to verifying potential tenants for a rental property.

A landlord creates their own profile on Simpl.rent and interested tenants consent to share their banking information to see if they’re a good fit.

Thanks to open banking, Simpl.rent is able to assess the financial history of potential tenants and quickly determine creditworthiness based on real-time financial data. That means landlords can make decisions on renting to potential tenants much more easily, and tenants can get an answer about their applications quickly.

It’s a win-win!

6. Przelewy24 - Make  easy online payments

One example of how open banking is changing the game is payments between accounts. That just means sending money from one bank account to another online.

No cards, checks or cash needed. This practice is made much easier under open banking! Because of open banking, sellers can create easy online payment platforms. With those platforms users can pay for items with a simple account-to-account transaction. That benefits sellers, who get to offer a simpler product. It also benefits users, who get to buy items much more easily, with just a click of a button. 

These are just six popular examples of how open banking is used every day. But there are plenty more uses, too. Open banking can help users manage their finances, and it can help companies verify a client’s affordability.

Overall, it can give companies a better understanding of their clients. There are plenty of uses for open banking when it comes to spending, money management, and applying for loans.

And as it becomes more popular, those uses are only going to keep growing!

For more updates and analysis on open banking, follow Kontomatik on LinkedIn

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