The best 5 open banking

use cases
Published on January 15, 2021

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Søren Nielsen
is the Chief Commercial Officer at Subaio. He is a former editor-in-chief, an
experienced fintech entrepreneur, and an author. Follow him on LinkedIn.

Open banking is revolutionizing the use cases offered by banks

and financial institutions. Here are five of the most popular ones.
The benefits of open banking for banks and financial institutions are wide and varied. It creates a

larger and more diverse digital offering for them and allows them to develop a range of different
products – faster. Investing in various aspects of open banking can have a huge upside and many
banks have already key areas of use that are worth paying attention to, such as how to digitize

customer experience. But before we dive into the most popular use cases, let’s answer a couple of
questions:

What is Open Banking?

Open banking allows banks and other financially regulated institutions to more easily access the
financial data of customers. The exchange of data is facilitated through APIs or Application
Programming Interfaces. This is a set of computer programmes which make it easier for various

banks and financial services to communicate with each other.

The goal is to improve current and develop new features, which can drive down costs or generate
revenue. All of which can be closely linked to different financial products.

How is it helping customers?

It essentially provides customers with greater access to a range of financial services from a larger

number of providers. This has given rise to numerous fintechs, while the established financial

industry is also providing new open banking use cases.

This benefits customers because it can allow them to for instance bring all their accounts and
products into one interface, giving them an overview of their finances and allowing providers to

work out which products are best suited to them.

How open banking goes further than PSD2

PSD2 is a European regulation that came into force in January 2018 and was designed to increase

security in electronic payments and competition across Europe. To do this, it encouraged the use
of APIs – these APIs can be used by established financial players, but also new fintechs and tech

companies like Apple and Google.

PSD2 can thus be seen as the regulatory starting point, while open banking goes further. While

PSD2 for instance focuses solely on payment accounts in a well-defined regulatory framework,
open banking can include investment accounts, business accounts and APIs not in PSD2. In

essence open banking is broader and is defined by the digital strategy, access to data and

functionalities that a bank or financial institution is giving.

Here are five examples of the most popular open banking use cases:

Account aggregation
This is probably the most popular one. Account aggregation is offered by a number of financial

services companies and involves using an API to allow customers to get an overview of their

various accounts.

Account aggregation means customers can see multiple accounts from different providers on one

interface. It’s not just straightforward payment accounts either, which the PSD2 framework gives

access to, as there are examples of where you can view credit cards, investment accounts and loan
accounts in one place, as well as combining consumer and business banking in the same

interface.

Examples: Plaid, Tink, Nordic API Gateway

Personal finance management

There has been a big increase in personal finance management (PFM) tools in the latter years.

These tools are meant to give the customers a complete overview of their financial situation. This
can for instance be with placing payments in different categories or showing how much money

the customer has left to spend this month. Dedicated software allows PFMs to pull in information

from various accounts into one informative interface.

Having data centralized can help banks and financial providers get a clear idea of what customers
would benefit from and it also gives a customer a clear picture of how their money is performing

for them. It creates financial insights.

Of course, financial management and wealth management pre-date its arrival, but open banking
has unlocked some of the possibilities within a PFM. Both when a bank is connecting its own APIs

across different business units, but also in connecting to API’s at other banks. Open banking has

triggered a greater proliferation of financial management services, offering choice to the customer
and opportunities for providers to offer a range of tailored products.

Examples: Spiir, Yolt, Mint

Instant credit risk

Open banking can rapidly speed-up credit applications by allowing lenders to gain an almost
instantaneous overview of an applicant’s credit history. Prior to that, assessing applicants for credit
often involved pulling together different documents from different banks and institutions. This

was a slow process and not only slowed down the delivery of credit services but led to a negative
customer experience.

Gaining access to a raft of instant banking data can allow lenders and underwriters to make

quicker decisions.
It can also allow the consumer to quickly find the products for which they are most likely to be
approved. Instant credit risk means they can use comparison sites for loans and credit cards and
be given an indication of their likelihood of acceptance before applying. This tendency has also

seen the rise in a lot of the “buy now pay later” functionalities that are on the rise within the
financial industry.

Examples: Klarna, Afterpay, Zip Pay

Subscription management

While account aggregation and PFM services have been around for a while subscription
management is fairly new. This feature gives both insights and actions. Subscription management
basically detects all the recurring payments from the customer and shows them in one interface –

this can be anything from a streaming service or a fitness membership to a utility bill or a monthly
mortgage. From here the customer can manage the recurring payments by for instance
cancelling unwanted subscriptions or getting notified about upcoming payments.

Gaining insights into various transactions can allow open banking to be used effectively for
subscription management. Especially if recurring payments from different accounts in different
banks are aggregated into the same interface. The benefits for the bank or the financial institution

can be lower customer support costs on recurring payments, better churn rates on current
customers and the possibility to cross-sell financial products. Find out how Subaio’s subscription
management system works here.

Examples: Subaio, ApTap

Opening new accounts

Opening a new account with a bank has become easier and faster. This is highly linked to the
Know Your Customer (KYC) process. Often banks want to get as much information as possible
about a customer before authorizing a new account opening. This is obviously for security reasons,

but also to limit the risks of for instance fraud, while this onboarding process also can help in
profiling the new customer.

Open banking allows the flow of bank data so that information such as an address, occupation,
income details, name and date of birth as well as credit history all match up. Because this can be
done in a matter of minutes, the experience of opening a new account is much smoother for

customers – and suddenly this can also turn into a competitive necessity. Opening a new account
digitally is the customer’s first interaction with the bank online, so expectations on speed and user
experience will be high for some customer segments.

Examples: IDnow, Onfido, Authent

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