On top of Open Financ, from individual entrepreneurs operating out of their homes to corporations worth billions, the COVID-19 restrictions have underscored our growing dependence on digital platforms as the backbone of our society and economy.
Companies worldwide have rushed to speed up technology integration to facilitate remote work. Video conferencing has swiftly become the standard, supplanting face-to-face meetings, and various project management, messaging, and document collaboration tools have been deployed.
As the consumption of online services continues to rise, businesses must consistently reassess and expedite their digital transformation strategies while staying ahead of upcoming trends. In the realm of financial services, Open Finance solutions offer the potential for faster, more precise, and well-informed decisions, enhancing both customer acquisition and satisfaction.
For instance, in the mortgage sector, there are platforms that simplify and streamline the underwriting process. These tools leverage the bank transaction data of mortgage applicants, reducing the time required to obtain proof of identity and income. Consequently, this reduces the workload for mortgage brokers and enhances the overall experience for customers.
Given the current pandemic, digital onboarding has become even more critical, particularly since many financial and professional services companies have closed their doors to the public. Evolving consumer behaviour and economic and social considerations suggest a significant decrease in face-to-face customer onboarding across the financial services sector in the short, medium, and long term. This shift is particularly notable for businesses such as mortgage lenders, building societies, and financial advisers. The pandemic has accelerated existing trends, compelling and incentivising companies to respond.
To survive, businesses must adjust and expedite their digital customer acquisition offerings while maintaining rigorous compliance with regulations and robust anti-fraud mechanisms. The much-needed digitisation can be achieved through intuitive Open Banking KYC digital platforms, incorporating a combination of ID verification tools, customised customer journeys, and seamless integration into existing systems.
With their enhanced digital data capabilities, Open Banking solutions also play a crucial role in combating financial fraud. Recent statistics from Cifas indicate a 14% increase in mortgage application fraud over a six-month period and a 32% rise in submitting false documents*. The Covid-19 lockdown has witnessed a surge in online financial scams, exploiting people’s anxieties and uncertainties through various malicious methods.
Cybercrime poses risks such as harvesting personal data, identity theft, online account hijacking, and significant financial consequences for both customers and businesses. Directly extracting digital data from the applicant’s bank account enables brokers and financial advisers to mitigate the risk of fraud substantially, eliminate the possibility of false physical documentation, and conduct a more thorough analysis of potentially suspicious or unusual trends in the applicant’s data.
The unforeseen events of the past few months have highlighted the importance of technological agility and advanced digital transformation strategies for companies to transition smoothly to a predominantly virtual business environment. To stay competitive in the market and align with changing consumer preferences, businesses must continually anticipate upcoming trends. One such evolution is the concept of Open Finance.
In many respects, Open Banking has paved the way for an Open Finance world, building on the same fundamental framework. By enabling consumers and SMEs to access and share their data with third-party providers, innovative products and services can be developed to meet future business and customer needs. The key distinctions between Open Banking and Open Finance lie in the range of products covered and data usage, storage, and portability transparency.
Open Finance promises to develop an app that provides a comprehensive view of an individual’s current status, balance, or history across all financial products they own. Users can access information on their banking, savings, investments, pension, and mortgage products through a unified interface, along with insights, trends, and comparisons with similar financial products.
The potential impact of Open Finance on the financial services industry is profound, unlocking advantages for both providers and end-users. Embraced by the FCA to stimulate innovation and competitiveness, Open Finance is poised to permeate every sector, including banks, credit reference agencies, financial advisers, fintechs, debt charities, insurers, investment managers, and mortgage brokers.
The altered work environment brought about by the COVID-19 pandemic underscores that digital transformation is an ongoing, dynamic process with no fixed endpoint. At its core is a commitment to delivering improved services as demand, technology, and preferences evolve. Overcoming one challenge merely sets the stage for the next, and companies that fail to adapt to current and emerging trends will lag behind.
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