60 percent of potential revenue is lost due to excessive customer onboarding time; also, as per the reports by Bain & Company, “Major banks have lost around $200 billion in fines between 2009 to 2017 due to anti-laundering cases”. The company needs stringent laws and evolving regulations to act on anti-laundering cases, but at the same time, this will also make the customer onboarding process complex.
Other challenges that customers are facing due to the complex onboarding process are:
Financial institutions are moving towards new cutting-edge technologies to overcome these challenges where Open Banking becomes the game-changer for the present API-based economy. Open banking is similar to “killing two birds with one stone” as it simultaneously looks after the threat from fraud cases and enhances the customer experience.
Open Banking solving the threat-related issues
Open banking means banks will allow their partner or third-party service provider to access any transactional details and customer account information when the customer actively requests it. Thus open banking becomes a new-age digital frontier for deal with fraud-related issues. From a service provider perspective. It can incessantly help in the following ways:
Quickly verify your customer’s identity
With third party API, fintech or other service providers can create a connection between the application and the customer’s bank account details which will help retrieve financial information. Thus, with a single open banking API, service providers can accelerate the onboarding process through quick verification and risk identification.
Know customers accurately
In an evolving environment where customers are looking for an enhanced experience and omnichannel presence, open banking API makes it possible for service providers to know their customers affordably. With one seamless application, businesses can understand the customer. Take credit scoring, for example; real-time customer data will provide additional insights, thus identifying risk and decreasing it becomes easier.
Open Banking helping in scoring high trust score
Just as open banking is helping out fintech and other service providers with easy and open access to the customer financial details from the banks, it has also raised concerned questions on the security of the details. Thus, an open banking directory has been formed, which acts as a trust anchor. The third-party application provider must register with the bank through an open banking directory which guarantees the authenticity of the application providers.
Open banking has a host of new opportunities to transform the financial landscape. Enabling third-party providers to access the customer details has accelerated the onboarding process. Simultaneously, it has also created transparency which enhances customer experience. Open banking caters to both customers by assisting them seamlessly to reach their financial goals quickly and lenders by faster verification and identity checks based on the client’s historical financial information.