With the Payment Services Directive 2 (PSD2) that regulates Open Banking in Europe set for adoption in September 2019, most innovative financial institutions are already preparing for a new era of access to account information.
Here are a few things any bank and lender can do to prepare:
1. Make a critical assessment of the existing income verification process.
How are you currently verifying income and what are the results? What percentage of applications are rejected due to insufficient income data? If the answer is “too many”, you’re ready for a change.
2. If you're not already using an account aggregator, consider trying one. Or several.
Even before Open Banking comes into full force, it’s possible to use third-party account aggregation solutions that grant you access to customer account data in an automated way. Here's a list of some aggregators that provide the service.
If you’re already using an account aggregator, consider using a good transaction categorisation engine on top.
3. An account aggregator alone is often insufficient for verifying income with high accuracy. Income verification is only as good as thetransaction categorisation algorithm behind it. There are a few companies on the market that specialise in accurate income verification algorithms, Nordigen being one of them.
Here’s what we've been up to recently.
In recent years, tech giants like Apple, Google and Amazon have started planting flags in the financial sector, intruding on traditional financial institutions. Facebook is finally joining the race with Libra, its digital currency described as a “simple global currency and infrastructure that empower billions of people.”
As a society, we are gradually moving away from paper cash, increasingly gravitating towards alternative digital payment methods - contactless-cards, cryptocurrency, mobile and wearable technology. Regulatory driven initiatives like EU's PSD2 and UK's Open Banking are propelling financial innovation and enabling the emergence of new products and services.