The uses of open banking

Open Banking, a concept in constant evolution, has profoundly changed the financial landscape in Europe. This movement has been catalyzed by progressive regulations aimed at opening the doors of financial data to third parties, and it has brought significant benefits to numerous economic sectors.
In this article, we'll explore the ins and outs of Open Banking, its implications for the accuracy of solvency scores, and its practical applications in a variety of areas.

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Open Banking in Europe: a financial revolution

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What is open banking?

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Open banking, a concept born from the European Union's Payment Services Directive (PSD2), was introduced to stimulate competition, promote innovation and strengthen consumer protection.

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This regulation requires financial institutions to share their customers' financial data with authorized third parties, subject to their consent.

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Over the years, open banking has evolved to include new security requirements, ensuring data confidentiality and protection against fraud. These advances have allowed the gradual development of Open Banking uses, which are now integrated into numerous services and economic sectors.

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How can open banking be used?

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At Meelo, open banking is transforming the way you interact with your finances, with an emphasis on simplicity and transparency.

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Thanks to our intuitive platform, you can aggregate all your financial data in one place, giving you a clear and real-time view of your financial situation.

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This not only allows you to track your expenses, develop personalized budgets and optimize your investments, but also to benefit from tailor-made financial recommendations, designed to help you reach your financial goals with confidence.

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Accurate solvency scores through categorization

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One of the major strengths of open banking lies in its ability to precisely categorize consumer spending and income.

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The more granular the data is, the more reliable the solvency scores drawn from that data are. This precision allows lenders to better assess credit risk, personalize loan offers, and reduce default rates.

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At Meelo, 90% of data is categorized thanks to a sequence of several proprietary algorithms combining business rules, artificial intelligence and enrichments via open data.

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Who uses open banking?

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Open banking, a true revolution in the financial sector, is attracting a growing diversity of stakeholders, going well beyond traditional banking players alone.

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At the forefront, neobanks and fintechs are exploiting this innovation to offer personalized financial services and take advantage of open APIs, allowing optimized management of personal finances.

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Consumers, increasingly looking for agile and transparent solutions, are enthusiastically adopting these new offers that offer them greater control and an overview of their bank accounts.

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SMEs and large companies, for their part, are turning to open banking to automate their accounting and improve their cash management.

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Even traditional banks, which were initially reluctant, are embracing this trend to remain competitive, by integrating ready-to-use third-party services and by promoting collaborative innovation.

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In this fast-paced ecosystem, open banking is redefining standards and opening up new perspectives for anyone who wants to benefit from the advantages of open and connected finance.

Open Banking uses: concrete examples and sectoral applications

E-commerce:

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Faster payouts : the integration of open banking allows e-commerce platforms to offer direct payment options from the bank account, reducing transaction time. For example, instead of entering credit card details, a customer can simply authorize a direct payment from their banking app.

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Simplified identity verifications : for a new customer, open banking can speed up the identity verification process by using already verified bank details, thus reducing fraud and the risk for the merchant.

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Credit financing :

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More accurate credit assessments : lenders can access a customer's financial data to gain a better understanding of their solvency, allowing for more informed lending decisions. For example, instead of relying solely on the credit score, a lender can analyze actual cash flow to assess repayment capacity.

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Recovery :

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Access to financial information in real time : collection agencies can use Open Banking data to understand the debtor's current financial situation, allowing for a more targeted and effective approach to collection strategies.

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Rental and real estate :

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Tenant check : landlords can use open banking to quickly check the solvency of potential tenants, for example by accessing their account statements to confirm their regular income.

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Simplifying home loan processes : banks and financial institutions can use data accessible through open banking to speed up the assessment and approval of real estate loans, by having direct access to the applicant's financial information.

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Simple access or continuous access: which choice to make?

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When it comes to accessing customer financial data, businesses need to decide between easy access and ongoing access.

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Simple access allows visibility on all of the customer's banking transactions, but this visibility is only offered once, at the customer's request.

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On the other hand, the Continuous Access allows continuous access to data for a period of 180 days, thus offering extended visibility, for example after a loan has been granted.

However, this mode has a disadvantage: keeping the connection active incurs additional costs.

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The choice between these two approaches depends on specific business needs, security and privacy considerations, and available budget.

Each has pros and cons to consider.

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Highlighting instant payment

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THEInstant Payment, an Open Banking innovation, is a powerful tool that supports our commitment at Meelo to fairer and more accessible financing.

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Although the Open Banking process may take slightly longer than paying by card, Instant Payment has key advantages: it is simple to use, does not require a physical card, and is done directly via a smartphone.

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In addition, the transaction is instant, allowing the merchant to receive the money immediately, unlike card payments that can take 24 to 48 hours.

Finally, Instant Payment is irrevocable, guaranteeing that strong authentication prevents any dispute of the transaction by the customer with his bank.

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Consumer financial inclusion

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- Facilitate daily transactions : instant payment allows individuals to manage their personal finances more effectively and independently, making money transfers between friends or family members immediate and hassle-free.

- Consumer empowerment : this technology promotes financial autonomy by allowing immediate purchases, thus supporting responsible and informed financial decisions.

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Support for ethical businesses

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- Fair payments for suppliers : we encourage businesses to use instant payment to ensure fair and transparent transactions with their suppliers, thus promoting ethical business practices.

- Eco-responsible cash management : this innovation supports more responsible and farsighted cash management, in line with the principles of sustainable development.

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E-commerce transformation

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- Ethical online transactions : instant payment allows e-retailers to offer an improved customer experience while adhering to ethical and transparent business practices.

- Reduction of environmental impact : by speeding up transactions, we minimize the ecological footprint associated with traditional payment processes.

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More inclusive real estate sector

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- Fair real estate transactions : the use of instant payment for security deposits reinforces trust and fairness in real estate transactions, ensuring total transparency.

- Support for committed real estate agents : fast commission payments promote fair and timely remuneration for professionals in the sector.

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Accessible and responsible financing

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- Instant loans for everyone : we facilitate access to instant loans, with an emphasis on financial inclusion and emergency assistance.

- Conscious debt management : Instant refunds allow merchants to recover funds immediately, making the collection process easier. When a customer owes a sum, these instant payments ensure a quick refund, offering a solution to recover the money owed without delay.

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In conclusion

Open banking is a major catalyst for change in the European financial sector.

Its constantly evolving regulations, its ability to improve the accuracy of solvency scores, as well as its numerous practical applications in various sectors make it an essential subject.

The choice between simple access or Continuous Access remains a challenge for businesses, while instant payment promises to further revolutionize financial transactions.

Open banking is much more than a simple regulatory evolution: It's a revolution which continues to redefine how we manage and use money.

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