The demand for online loans is on the rise, challenger banks are starting to offer innovative banking services and banking apps not run by banks are becoming increasingly popular. The European financial world owes innovations like these to Open Banking. PSD2 and FinTechs, which are both contributing to the arrival of new innovations on a daily basis, should further accelerate the development of Open Banking.
But what actually accounts for this? Is it the bank customers who make the most of the new possibilities afforded by Account Information Services and Payment Initiation Services? Who are today’s digital banking users? And how can banks and FinTechs use this information to create even better banking services in the future?
We have evaluated the data available to us in order to describe the possibilities of Open Banking and to show potential ways in which banks, lending institutions, insurance companies and FinTechs can enhance their advisory expertise on the basis of valid data material. This is a snapshot that is not necessarily representative of the total number of users on the FinTecSystems’ Open Banking platform, or even of the Open Banking community as a whole. Nevertheless, the results of this analysis provide fascinating insights into user behaviour and the potential afforded by Open Banking and Analytics. We present the insights we have obtained in this blog post.
Who Uses Open Banking and Access to Account (XS2A)?
With more than 5,000 connected financial institutions and access to around 100 million bank accounts, FinTecSystems operates one of the most comprehensive Open Banking platforms in Europe. The following insights are based on anonymous transactions in the area of Account Information and Payment Initiation Services. In other words, this is real data and not just survey results or rough estimates.
Open Banking has been predominantly a man’s business so far. 68% of #XS2A users are male, while only 28% (unfortunately) are female. 😕
It quickly became clear that the majority of Open Banking users (73 percent) are still in the private customer segment. Until now, only 27 percent of users who grant access to their accounts (XS2A) are business customers. However, the business customer segment has experienced the strongest user growth over the past twelve months. Typical B2B applications such as leasing, purchase financing and bookkeeping can be significantly optimised with the help of Open Banking and are enjoying increasing popularity.
We were also very surprised to discover that 68 percent of private Open Banking users are male, whereas only 28 percent are female. In this regard, the gender distribution differs considerably from the overall ratio in Europe.
Before we get into the nitty gritty, we recommend that you take a look at our white paper: Open Banking: Game Changer with a Great Future. By reading it, you will learn how banks and FinTechs are building the global banking ecosystem.
By far the most frequently used Open Banking services are Account Information Services. 63 percent of the transactions considered took place as part of loan applications, credit checks, account switching services or the use of banking apps i.e. whenever a third-party provider accesses a customer’s online account on behalf of the customer in order to aggregate information.
Payment Initiation Services accounted for 37 percent of the transactions considered. As the name suggests, PSD2-certified third-party providers initiate payments on behalf of an online banking account holder e.g. as part of online transfers in e-commerce. These now represent a convenient and popular alternative to conventional payment by credit card or online payment services such as PayPal. At 89%, users of Payment Initiation Services are predominantly private customers. (Please note: With OnlineÜberweisen, FinTecSystems offers a simple and secure payment method for online trading.)
Consulting Potential Available: Overdraft Facility not Sufficient in Almost Half of Cases
A differentiated picture emerges when looking at the financial situation and credit behavior of Open Banking users. 24 percent of private customers have an overdraft facility. Of these, 20 percent make no use of it at all, while 45 percent exceed their credit limit.
At the same time, 63 percent of account holders who have not been granted an overdraft facility by their bank overdraw their account. As a result, chargebacks were issued for 26 percent of the online accounts analysed. For 18 percent, debt collection measures were implemented while 1.4 percent were affected by seizure measures.
By conducting a solid analysis, banks can relieve and optimise the financial situation of their customers. The collection and enrichment of transaction data open up many approaches for customer-centric thinking and action. This enables financial institutions to respond to the individual situation of a customer, and, for example, to offer suitable lending alternatives and debt restructuring solutions in the case of a permanent overdraft. The need is certainly there: only 36 percent of the online banking accounts surveyed had a positive balance during the survey period.
Open Banking makes it possible 🔍: By conducting a solid analysis, banks can relieve and optimize the financial situation of their customers.
Digital Expenditure Account: Almost 20 Percent of Net Income Is Spent on Credit Obligations
73 percent of Open Banking users are employees who receive a regular salary. Their average salary is 2,144 euros, while the median is 1,817 euros. This means that the net income of Open Banking users is slightly higher than the average net salary of 1,945 euros in Germany.
The salary levels are broken down as follows:
- 19 percent with a salary of up to 1,000 euros
- 39 percent with a salary between 1,000 and 2,000 euros
- 25 percent with a salary between 2,000 and 3,000 euros
- 17 percent with a salary of more than 3,000 euros
32 percent of expenditure is accounted for by rent, 19 percent by credit obligations and 11 percent by insurance payments. The average budget surplus is -87 euros, with 41 percent of online banking accounts showing a positive budget surplus of 289 euros. For 59 percent, the budget surplus is negative and amounts to -352 euros.
The optimization potential is abundantly clear in light of the chargebacks mentioned above: the majority of chargebacks that result from a lack of available funds at the time of the direct debit can be avoided by a cash flow analysis and by determining the optimal time for the direct debit.
The enormous potential of Open Banking becomes especially evident when viewing users’ expenditure accounts. Transaction data in online banking accounts can be enriched with valuable information from other sources, providing a comprehensive overview of a customer’s creditworthiness. With individually tailored in-depth advice from financial institutions, tendencies to go into debt can be detected at an early stage e.g. as a result of living in a city with higher rents.
This way, Open Banking not only provides a better understanding of the financial situation of customers, it is also the prerequisite for forward-looking financial planning. This is a valuable service that banks and FinTechs can use to strengthen customer relationships and increase trust levels in the long term.
The anonymous data on which all the statistical data is based was processed between February and April 2019 via the FinTecSystems Open Banking platform.