Any consumer who has ever made a classic credit application will remember the rather sluggish procedure. In order to perform credit checks, the lending institution requests account and salary statements by email, fax or post. The subsequent check takes some time, meaning that several days go by before a customer gains approval. With the help of the Digital Account Check, this process can be shortened from days or even weeks to just a few seconds.
This is made possible by real-time access to the consumer’s online banking information. With the consumer’s consent, financial institutions and third-party providers can use this data to make credit decisions and thereby optimise the conventional credit check process.
Better Customer Experience Boosts Demand for Loans
The quicker procedure enabled by the Digital Account Check not only saves a lot of time for all parties involved, it also improves the overall customer experience when granting loans. German consumers have concluded between seven and eight million credit agreements per year over the past ten years.
However, it is striking that while consumer buying behaviour has increasingly moved to online channels, digital transformation in lending has not progressed at the same pace. From the consumer’s perspective, the traditional process of granting loans has in some ways interrupted the otherwise smooth online experience.
This is now changing with the Digital Account Check. After all, the need for online loans is self-evident: from the classic online shop to numerous comparison portals and specialised instant credit providers, credit offers with quick credit checks via the Digital Account Check are booming.
Banking API and XS2A: How the Digital Account Check Works
The Digital Account Check digitalises the previously paper-intensive credit check process and enables credit decisions to be made in real time. This is technically possible through access to the consumer’s online banking account (XS2A) via an interface to the account-holding bank (banking API).
The technical basis for the Digital Account Check is established through ‘Access to account’ (XS2A for short) via banking APIs:
- Banking API: Using banking APIs, banks provide third-party providers with data such as customer and account information that was previously reserved primarily for banks. The customer, who shall retain sovereignty over their personal data at all times, must give their express consent for this to occur.
- XS2A: Access to account (XS2A) means access to the customer’s online banking account. If the customer allows a third-party provider (TPP) to access their online banking account, then this provider can extract the turnover and transaction data as a basis for a credit decision and make it available to the lending institution.
Third-party providers (TPP) in the technology sector have meanwhile specialised in the Digital Account Check. As an account information service, they analyse and aggregate customer and account data and refine it using trend profiles, risk characteristics and other information that provides details on creditworthiness.
Through an aggregated revenue and expenditure account, liquidity analysis and real-time validation of the following information, all parties – online traders, comparison portals and lenders – can optimise the conversion rate and speed up the credit approval process:
- Verification of the account holder and debit account for the disbursement and repayment of the loan.
- Analysis of account balances, cash flow and average budget surplus
- Grouping of income and expenses as well as allocation to categories such as salary, rent, electricity, insurance, cost of living and holidays in the form of a revenue and expenditure account.
- Basic information on credit cards used, existing leasing contracts or other liabilities
- Direct data transfer from the electronic account statement to the credit application
Lending financial institutions access the information via an API and can thus reduce the default rate for loans and minimise the risk of fraud. At the same time, the information gained from the Digital Account Check is a valuable basis for granting customers credit approval as quickly as possible.
Banking APIs are the technical basis for minimising media disruptions in credit checks. Customers can use online loans that enable access to customer and account information via an API interface thanks to new third-party provider solutions. We have summarised how a banking API works for you in this blog post.
Advantages of the Digital Account Check for all Parties: Quick, Transparent, Secure
Compared to the conventional application procedure, the accelerated credit check via the Digital Account Check offers advantages for consumers, lending banks, intermediary online portals and FinTech start-ups alike:
Advantages of the Digital Account Check for consumers
Those facing the decision of whether to buy a new piece of furniture and a new computer will benefit from quick clarification of the financial issue thanks to the Digital Account Check. Consumers do not need to leave the online shop or comparison portal and can apply for their online loan directly on their provider’s user interface.
You can say goodbye to the cumbersome sending back and forth of account statements, salary statements and other documents needed to check creditworthiness. Information exchange via a banking API and XS2A runs without media disruptions and is completely secure.
Advantages of the Digital Account Check for banks
Lending financial institutions benefit from a secure credit decision based on a comprehensive analysis of the applicant’s creditworthiness using their real and current account information.
Once the digital credit check has been completed, follow-up processes such as conclusion of the contract can also be carried out online. This gives banks the opportunity to fully digitalise the traditional process of granting loans, which usually involves copious amounts of paper.
Advantages of the Digital Account Check for start-ups in the credit sector
Online credit providers, factoring providers and comparison portals can offer their customers a seamless user experience with the help of the Digital Account Check. Previously, customers had to leave the provider’s website and submit their application offline, but now everything can be handled under one interface.
Consumers can perform all the procedures they need to complete before making their purchase within a frontend. The advantage: an optimised conversion rate through a convenient, fast and secure user experience.
The online credit provider cashpresso offers consumers framework loans with particularly flexible conditions. This is made possible by a detailed real-time credit check using the Digital Account Check. Read this detailed case study to discover the challenges that cashpresso faced when granting loans and how the company developed solutions to overcome them.