Digital customer on-boarding with open banking and Nordigen

In our increasingly digital economy, building customer experiences is critical. For industries that deal with credit risk and are challenged to simplify customer onboarding flow while acquiring enough information to provide the right service to a customer, open banking is very useful.

What is open banking?

Open banking is a concept that allows customers to share their bank account information with a service provider. This is typically done in an automated way using APIs, as soon as customer has provided her consent for accessing her bank account data. Open banking has been used by top tier financial institutions since the late 90’s, but today service providers from any industry are able to use open banking technologies to create digital customer experiences.

Open banking in many cases allows service providers to get the following information from their customers' banks:
identify information — name, address, personal ID code, contact details, bank account number;
account balance — the outstanding amount in the customer's current account;
transaction history — the last 90 days but can be more in specific cases.

How it works?

Open banking works a bit differently across regions, but the main principles of open banking remain the same. Below are the main steps involved in digital customer on-boarding, where a service provider uses open banking to on-board a customer.

1.Customer visits a Service Providers website and chooses a service.

2.Customer is asked to share her bank account information with the Service Provider.

3. Service Provider retrieves the Customer's bank information in seconds.

4.Customer is redirected to the service website and is good to receive the service.

In this example the Customer only had to log in to their bank account to provide the Service Provider all the data it needs to offer a good service. No long application forms are needed — most on-boarding questions can be answered by the information available in the Customer's bank account. The process of acquiring account data from a Customer's account or connecting to Customer's bank is called Account Aggregation.

The value that open banking brings to customer on-boarding is that companies no longer have to choose between more customer information / low conversion rates or less customer information / high conversion rates. Companies can have both — more information AND high conversion rates.

Use-cases for open banking

Based on the service provider's business model, there can be an array of applications for open banking. Here below we have listed a few of the most well known use-cases already used by banks, lenders, fintechs and insurance companies.

  1. Identity verification — while there are many methods to verify one's identity and perform KYC (know your customer) checks, open banking provides a basic identity verification data to cross-check customer's name, address and other details. Nordigen helps lenders to do identity verification with our KYC product.
  2. Income verification — before open banking, lenders relied on asking their customers to submit bank statements, tax reports or payslips. This often resulted in low conversion rates and high drop-off rates, as customers typically had to spend time to source the required documents. Open banking makes income verification as simple as logging in to your bank account. This feature is available using our Income product.
  3. Loan history verification — reliable credit history information is not often available and customers with little or no credit history are often referred to as “thin file” (i.e. having a thin credit file). Open banking data includes payments made to or from credit institutions, which can answer questions like “how often is a person using her credit card”, “how large is the monthly mortgage payment”, “how often the person uses the bank overdraft” and many more. Nordigen has a dedicated product for this use case called Loans.
  4. Risk behaviour identification — to limit credit risk exposure or proactively detect potential fraud cases, it's important have processes that monitor potential customers for unusual behaviours. It helps for companies to have answers to questions such as “has the person had any bad debts recently”, “is the person working for a risky industry”, “is the person's income level artificially large”. To help companies manage their risk, Nordigen has created a special product — Risk.
  5. Credit scoring and modelling — for risk analysts and data scientists, any improvement in a credit model's GINI, AUC or ROC is worth a fortune. Open banking data has proved to provide substantial uplifts on top of traditional credit data. On this front, Nordigen offers both black-box and white-box solutions, to cater for the needs of the most sophisticated risk teams. Our products include Risk, Simple Score, Credit Scores and Features.

How to get started with open banking and Nordigen

Nordigen's self-service open banking platform is a great way to get started with open banking data. It allows you to test how open banking works and see what kind of insights it can generate for your next project. To get started with our self-service, follow these simple steps:

  1. Create a free account on Nordigen open banking platform: dash.nordigen.com,
  2. Upload test data and explore Nordigen insights,
  3. Launch your first live prototype with Nordigen — the first 50 API calls are free, the next are pay-as-you-go (no fixed fees).

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