How Open Banking Makes Credit Checks Fast, Efficient and Risk-Free

8. September 2020 / in technology

The latest developments in Open Banking are radically transforming the financial sector with the emergence of new trends and opportunities. Regulations such as PSD2 and new API banking technologies are changing both the financial industry and consumer expectations.

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Open Banking builds on the unprecedented data sovereignty of bank customers, who have been able to independently decide what happens with their data since the revised Payment Services Directive (PSD2) came into force. In the spirit of contextual banking, it is the customer alone who decides for what and in what context they want to make their account data available.

Data sharing enables banks and financial service providers to respond to customer needs, optimise their working methods and drive innovation for each of their services. This drastically improves the customer experience in several ways.

A striking example of this change for the benefit of customers is the lending industry. Today’s lenders are moving away from traditional lending practices towards more digital, automated processes. The result: a fast, reliable risk assessment that ensures a better customer experience and reduced risk for lenders.

In this blog post, you will learn how Open Banking can improve and largely automate your credit checks thanks to access to real-time financial data and smart data that provide customised insights into spending behaviour.

Open Banking Recognises the Person Behind the Loan Application

Here’s the thing: traditional credit checks only look at the relevant finances of the respective individual - income, loans, accounts - done! No room for background details. However, anyone who deals with loans knows exactly why reports such as the PwC Report on the Future of Banking praise the opportunities that Open Banking offers lenders in the highest terms.

After all, a person’s life is neither stable nor predictable, which means that the question of creditworthiness is a complex one. Circumstances can change dramatically within a few days. Nevertheless, traditional lending is usually based on financial records dating back months, if not years.

Understand Spending Behaviour With Open Banking

This is where access to real-time financial data comes into play. Risk assessments are only meaningful if you can assess the current financial situation. This is where next-generation credit scoring takes the decisive step beyond hard figures to enable better understanding of the underlying spending behaviour.

Open Banking enables the optimal extraction of all data and figures to ensure risk-free lending. However, even these cannot be optimally used without the right insights. In order to be able to use financial data, intelligent analysis is essential for recognizing patterns behind the transaction data.

Infographic Smart Data Analytics Credit Scoring

To identify such patterns, Smart Data Analytics cleanses transaction data in real time and enhances it using AI-based algorithms. By categorising transactions, smart data technology helps you detect patterns in spending behaviour and identify income, investments or other loans. Put simply, Smart Data Analytics tells you the story behind the numbers.

This way, Open Banking and Smart Data Analytics help you (or your credit assessment algorithms) to better understand what the loan applicant is spending their money on. For example, you can see how liquid the applicant is once they’ve paid their regular expenses each month.

With this information, lending decisions can not only be made faster; they are also based on better data and more precise scoring. As a result, lenders can significantly minimise credit default risks. The results of your credit and risk assessments are as secure and reliable as possible for both you and your customers.

How does intelligent banking use smart data and artificial intelligence? Discover the answer here!

Open Banking Delivers Better Results for Lenders and Loan Applicants

Reducing the credit risk is a key factor for lenders. Open Banking not only reduces risks; having a holistic overview of the customer’s financial situation is the ideal basis for making the right offers. By taking into account the loan applicant’s lifestyle – and not just their income or account balances – you can offer a loan, credit or financial service that really suits your customer’s situation.

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Since risk assessments are more accurate, lenders can be more competitive by offering better loan rates. There is simply a lower risk of customers defaulting on their payment obligations.

Quick, Simple & Unbureaucratic: The End-to-End Digitalisation of Lending. Read how digitalisation optimises lending and has a positive impact on customer relations.

For applicants, this means a personalised, positive and seamless customer experience without any media disruptions. In addition, they benefit from a simplified, automated credit check process without any tedious paperwork, almost instant lending decisions and customised terms and conditions. The benefits go far beyond the actual digital credit check, because better lending decisions result in more reliable loans and loans that are repaid without any issues.

Open Banking Gives More Bank Customers Access to Loans


Suitable customer offers and a simple, fast application process take the customer experience to a whole new level. As a loan provider, you benefit from increased customer satisfaction and growing demand, which you can meet in an efficient manner thanks to optimal scalability.

While manual assessment and decision-making processes restrict growth, digitalised lending opens up new scaling opportunities. You can grow alongside your lending business without necessarily having to invest in human resources. This allows you to balance two key success factors in the lending market: a seamless customer experience combined with business process automation thanks to digitalisation.

In the blog post, Digital Account Check and XS2A Stimulate Real-time Credit Check, you can read more about our Open Banking solution for improved credit checks.

Schlagworte: technology

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