Category: Bank

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Steps for Digital Transformation in Banking Industry

digital transformation in banking

Consumers’ expectations from banks are changing and the need for seamless and efficient processes is growing. Banking Digital transformation helps banks evolve and stay competitive. Most banks have a huge task ahead of themselves and they need to step up to customer expectations to stay relevant in changing times. 

As per data collected through a survey, 14% of the US consumers were looking forward to changing banks, with 43% of customers planning to do so in the next 3 months. To retain customers and gain new ones, banks and financial institutions need to invest in digital and on-demand services. Customers who are on the market looking for a new bank will definitely prefer the ones that offer services beyond their expectations. This can be achieved by digital transformation in the banking industry. 

The financial services industry has been under huge turmoil in recent years, as tech companies have made subscription-based and on-demand services a normal habit. This unique environment has also entered the financial services industry. FinTechs have been filling the gaps that traditional banks lack. This newfound preference for FinTechs over banks is challenging for large financial institutions, as they need to innovate. This is why digital transformation in banking and financial services is becoming a necessity. 

Most financial institutions have started investing in digital transformation, and a lot of them are still struggling to keep their customers happy. In this article, we’ve mentioned the steps for successful digital transformation that banks can follow.

Best Steps for Successful Banking Digital Transformation

1. Leaders Should Focus on Innovation

Digital transformation in the banking industry requires huge changes and a cultural re-vamp. For innovation to be a major part of the industry, it needs to come from the top management to the lower level. To make this happen requires bringing in new leaders who have innovation experience. 

To embrace digital transformation in banking and financial services, leaders should be the ones who try to implement innovative solutions the most. The innovative ideas should focus on long-term ROI and should help in building a lasting competitive advantage rather than attempting to avoid the short-term costs of making impactful structural changes. 

To make sure the innovative processes are working ideally, there are six areas to focus on:

  • Skills: Build teams that have the skills to adapt to new methods
  • Security: Gain customers’ trust by providing data security
  • Stability: Create resilience in IT systems to ensure that digital and online apps don’t experience downtime
  • Scalability: The solutions should be able to scale up or down to meet changing customer requirements
  • Speed: Focus on building multi-functional teams that can handle several projects at once and can reduce time.
  • Satisfaction: Make sure that customers are satisfied with the end product.

2. Unlock Data Framework

Software built-in in older times didn’t take data integration in mind. Keeping customers’ financial data in silos that can’t be easily accessed outside the company. This is changing as people want to access their money anytime, anywhere. 

With the digital payments apps of today, it’s almost seamless to send and receive to friends and businesses. If a particular bank can’t connect to these third-party payment services, customers will switch to a bank that can. 

Financial institutions need to invest to build better online customer experiences, financial institutions should invest in a centralized data-linking system. To get a data linking system, financial institutions can either build one from scratch or choose a third-party vendor that can do the heavy work themselves.

3. Build Data Partnerships

Internal data is valuable, but it doesn’t provide the full picture of your customers’ financial lives. To offer the best products and services, you have to be able to access permissioned data from financial accounts they hold somewhere else. Up until recently, accessing consumer financial data from outside banks was next to impossible. But, in the last ten years, there are several technology companies that allow banks to do that. 

For retail baking customers, linking an external account is relatively simple. They select their outside bank and enter the username and password for those accounts. 

Data partnerships can paint the complete picture of a customer’s financial life, providing banks with the ability to build solutions that are able to keep up with customer demands. This can help in refinancing their mortgage at a lower rate or offer to target savings tips. 

In addition to data partnerships, banks can also consider relying on open banking API infrastructure that makes data sharing seamless. Partners like these can be a good solution for resource-limited banks that want to follow the digital transformation in banking industry.

4. Recruit Technical Talent

Technical talent is critical for successful digital transformation in the banking industry. Without proper technical talent, financial institutions can’t build the much-needed solutions. 

Recruiting high-performing product managers, designers, and software engineers start with building an innovative environment. Financial institutions aren’t exactly perceived as tech giants, so most technical talents don’t wish to work for financial institutions. According to a report, 50% of financial institutions say that they have challenges in finding IT talent. 

Fortunately, the culture is shifting, so banks need to offer enticing incentives for IT professionals. An ideal solution is to offer salaries that are up to par with top IT companies such as Google and Amazon. This may be the only way to recruit several tech workers, and possibly the most effective solution.

5. Focus on Solving Customer Pain Problem

Once a bank gathers data and the people they need, it can probably identify the gaps that digital transformation can fill. For example, a bank’s data team may need to find a significant number of customers, the problem they’re facing, and how to fix them. 

Addressing issues customers face can involve working with designers and engineers to build innovative solutions that can fix the pain problems. This is one of the biggest benefits of digital transformation in banking, as it focuses on improving customer experience.

6. Adopt a Product Mindset

Digital transformation in the banking industry isn’t a one-off process, it’s a continuous process. Ahead evolving customer expectations require having a product-focused mindset.

Here are some of the key factors financial institutions need to keep in mind:

  • Identify a key performance metric to improve upon
  • Get to know the needs of your audience and the type of problems they’re facing
  • Figure out ideas on how to solve the problems for the target audience
  • Identify the top 3 ideas and build prototype solutions around them for testing
  • Measure the impact of those tests and evaluate their results.
  • Choose the most ideal process and implement it

7. Choose Carefully Between Building and Buying

Not every financial institution can shell out millions of dollars annually for seamless digital transformation. For most banks, the challenge is how to deploy limited resources in the most impactful way. To make the digital transformation successful, banks and financial institutions need to decide which solutions to build and which technologies to buy. 

Let’s say, if an institution has an amazing onboarding flow, they should build upon it and make sure that they boost the process. They can do this by updating their existing technology or getting third-party technologies such as online document verification solutions or other solutions to enhance the process.

Digital Transformation In Banking Can Overcome Consumer Problems

The financial services industry is changing and is soon to be disrupted by external factors such as FinTech and cryptocurrency. Under these circumstances, history has shown that only a couple of players stand tall at the end. Others either go out of business, get acquired, or slowly go toward the decline. The great news is that the standing players come out stronger than ever.

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Open Finance and Changing Role of a Bank Manager

role of bank manager in Open Finance

The digital revolution in the banking industry has been put into overdrive since the pandemic, and many sectors are changing customer landscapes. Business banking is no exception. Banks are now facing growing pressure to introduce new processes in line with customers’ heightened expectations.

One finance can transform SMB banking by replacing traditional manual processes. It also allows businesses to support digital onboarding and automated monitoring, and it can reshape the role of a local bank manager.

What Is Open Finance?

Open finance is the next step after open banking APIs and it extends to a wider range of financial data. The primary purpose of open finance is to provide consumers and businesses with better control over their finances which allows users to transform the way they access financial services.

In layman’s terms, open finance leverages consumers’ financial data with their consent, and by using this data, banks can build new products and services such as online accounting, banking, and eCommerce platforms.

Challenges Faced by Bank Managers

For a long time, banks and bank managers have played an integral part in the high street and the wider SMB economy, however, since the last decade, things have been changing throughout the financial institutions. 

In the last 10 years, the biggest banks globally have closed tons of their branches. With growing large portfolios, reducing favor of credit cards, and ineffective and old internal systems, bank managers have been having trouble in recent years. Even before financial services had to battle with the pandemic, onboarding times were slow and customers often faced poor customer experience.

With traditional processes, bank managers are focused on admin work instead of adding value to their customers. Strong customer relationships and their presence in the community are important, winning and keeping business is a vital job when the competition is FinTechs that offer better services to the customers. The challenger bank, Starling, is the success story in the industry, and they’ve had a huge impact on the industry.

In the old times, banks relied on their bank’s managers to build relationships and tackle digital competition. As customers are becoming more tech-savvy, it’s not possible to tackle digital services with the old and traditional services.

How Banks Can Utilize Open Finance to Their Benefit?

Bank managers have 3 core responsibilities:

  • Onboarding
  • Monitoring current customers
  • Being active in new product offerings

Let’s dive deeper into these core responsibilities:

1. Digital Onboarding: So, what does online customer onboarding looks like with open finance? Instead of the usual back and forth of documents for ID and address verification, in just a handful of clicks on SMB simply connects their bank with their accounting, banking, and commerce platforms. Then banks are able to pull all necessary data for customer verification into the internal systems for an instant decision.

2. Automated Monitoring: Instead of banks asking customers for documents to keep monitoring updated, customer data can be leveraged to maintain continuous monitoring.

3. Meaningful Insights: Open finance allows bank managers to have a real-time and ongoing view of customer financial health. Bank managers don’t have to focus on 9-18 months of credit bureau data which boosts relevant and timely outreach. By leveraging open finance, bank managers can have a variety of tools in their arsenal that they can use to serve their customers better.

Adoption of Open Finance for Banks and Consumers

FinTechs are rapidly evolving and adopting financial technologies based on customer demand, the path for larger financial institutions is less clear. Now that Visa has started using open banking provider Tink, it’s just a matter of time that other providers will follow suit. Whatever happens in the industry, for banks to survive and to expand, they need to keep up with the latest technologies.

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Digital Account Opening and BSA Teams

BSA Teams

Small and large businesses are the same as they are required to follow the same Bank Secrecy Act (BSA) regulations. The associated costs and workload are manageable for big institutions with big teams, but it’s tough for smaller compliance teams. Fortunately, by implementing digital compliance tools, banks of all sizes can enhance their compliance procedures. Automated compliance tools enhance customer experience, boosting the acquisition and conversion rate of customer onboarding.

Online document verification software and online ID verification software have the potential to relieve pressure on manual compliance teams. Online verification platforms are designed to automate workflows and reduce the risk of fraud and false positives. Banks that operate with automated solutions improve compliance efficiency by more than 50%. This also reduces the workload from BSA teams and enables a renewed focus on big-picture compliance initiatives.

Complying with The Requirements of the Bank Secrecy Act

Maintaining compliance with BSA regulations can be highly expensive for most banks. Community banks may not have the budget to manage personnel for potential fraud cases. To be able to comply with the allotted time limitations is tough and expensive. However, the costs for non-compliance are even more as regulatory bodies tend to charge huge fines.

In theory, BSA providers have to use protective measures. The result is that most banks are hesitant to invest in the latest technologies or services because of how they’ll affect compliance. Even the most common banking procedures like bank account opening can become inefficient if the staff has to spend a lot of time on KYC/AML procedures.

How does Digital Banking Impact Compliance?

BSA teams usually find that legacy technologies aren’t compatible with the development of fast and accurate compliance workflows. The alternative is new technologies that can replace legacy systems to automate key procedures. Newer and more advanced technologies should also maximize compliance protection programs. The U.S. Department of the Treasury has stated that technological innovations are vital for smooth BSA compliance.

The best technologies for account opening offer multiple benefits.

1. Automates KYC/AML Evaluations

KYC and AML compliance during the account opening is the foundation of BSA compliance. Technologies provide workflows that are built to analyze data and context clues vital for detecting fraudulent activity while providing fewer false positives.

Banks can set up unique technologies to build a comprehensive profile for each applicant. Banks have to control every element of the KYC decision workflow in real time.

2. Reducing False Positives

Any transaction monitoring system generates a lot of false positives. False positives just add to human hours as they have to be investigated quickly and reported if they seem suspicious. And its worst, banks close down legitimate accounts or reject worthy applicants as a caution against false positives.

BSA/AML automation systems trigger way too many false positives which increase the burden on the BSA compliance team instead of reducing it. Doing identity checks is important but if the technology is profiling most applicants as suspects, then the solution isn’t doing the job necessary. The right type of technological solutions aims towards reducing false positives offering the BSA team relief from the overload of work.

3. Streamlining the Compliance Process

Using ideal digital solutions offers your compliance team a few critical advantages to maintain compliance. Automation is the key to success. Manual interventions slow down the processes, be it account opening, fraud investigation, or auditing. When certain factors are effectively automated, the staff has room for managing other tasks. With the right automation steps in place, your team has the bandwidth to address the risks as they emerge, thus streamlining the compliance process.

Automation of BSA Compliance to Stay Competitive

Digitization in banking comes with a lot of perks, this also reduces the workload for the bank’s BSA teams, in turn improving compliance efforts to avoid fines by regulatory bodies. Using digital account opening software isn’t just a way to streamline compliance, it’s also an opportunity to improve competitiveness by offering customers easy-to-use solutions.

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Identifying Fake Bank Statements: How to Fight Fraudulent Applications

fake bank statement

Prospective tenants, bank account openers, and other bad actors can use fake bank statements to commit a series of illegal activities. While fraudsters are getting smarter, they also utilize technologies to make near-perfect bank statements. Manual verification methods can’t keep up with the standards set up by bad actors. Identifying fake bank statements is the need of the hour to reduce fraud as much as possible. There are some common methods that can be utilized to identify fake bank statements.

How to Fight Fraudulent Applications?

Unfortunately, the problem of fake bank statements is still prominent and it has grown even bigger with the pandemic putting millions of people out of jobs. As a matter of fact, the problem with fake banks has become an even bigger nuisance for banks, financial institutions, building owners, and so on. The percentage of fake bank statement use increased from 15% to 29% in September 2020.

What makes this situation worse is that one in every 4 applications tends to go unnoticed. The increase in the number of undetected fraudulent applications can be allotted to the lack of proper verification solutions. Also, manual methods of verification can’t detect highly sophisticated forged bank statements. Automation and data utilization can be used to fight fraudulent applications.

Identifying Fake Bank Statements

1. Ensure that All The Figures Match Up

One common mistake that fraudsters make is that they don’t put in too much effort to ensure that all the numbers on the bank statements add up. If there is no money for automated verification processes, then you’ll need to take up your time to figure out if the numbers add up.

While identifying the bank statements, it is always a good idea to keep one thing in mind: people who fake bank statements will often use round figures. Proper round figures are usually a red flag while identifying if a bank statement is real or not. 

2. Take to a Bank Rep

If as a business you’re uncertain that you have received a fake or genuine bank statement, then one way to be sure is to reach out to a banking representative. Call the bank yourself, don’t rely on any information that’s listed on the bank statement. Once you get through to a banking representative, confirm all the details you want to confirm. 

In most cases, a banking representative will ask for a mail copy of the document. Chances are that you may not get much support from the bank. Various banks will try to prevent the manipulation of documents by adding some kind of digital signature to the PDF files, although this feature is usually to protect investment accounts. 

3. Search for Inconsistencies and Errors in Documents 

The first potential red flag regarding the bank statements is the major & minor inconsistencies in the documents. Are the font size and the font type consistent with other document types of the same bank? Is the bank’s logo accurate and up to the standard? People who create fake bank documents often get lazy and these inconsistencies can help in preventing online fraud. Do the numbers add up in the document and do the ending balance make sense? Are there any withdrawals that are suspicious? If the bank statements contain any of these inconsistencies, then you may need more research.

4. DIRO’s Online Document Verification

While you can rely on manual methods of verification for a lot of things, they still have some limitations. By utilizing technologies, you can easily distinguish between fake and real documents. DIRO’s bank document verification software verifies documents instantly and provides strong proof of verification backed by verifiable credentials. DIRO’s online document verification tool can verify over 7000 documents from all over the world by cross-referencing document data from an original web source.

The technology can eliminate the barriers of manual verification and enhance the overall document verification process and eliminate document-related fraud. 

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Chatbots in Banking Sector: Use Cases

AI chatbots in banking sector

Chatbots are amazing. They’ve helped countless sectors improve customer engagement and customer service. Now that the global banking sector has started seeing the benefits of integrating technologies into their process, there are so many technologies left neglected. Providing seamless customer service and experience is vital for retaining customers for any bank. And, in this age of digitization, customers expect banks to be more innovative in their workflow and how they offer services to their customers. The use of AI chatbots in the banking sector is another innovation that can be useful for banks and customers.  

Customers’ expectations are high when it comes to digital banking services as FinTechs are putting new digital products and services on a daily basis. Integration of high-end technologies such as artificial intelligence and open banking APIs can help in streamlining or completely transforming the recurring and mundane tasks. In this age of AI-powered tools, chatbots in the banking industry are another solution that the banking sector can use. 

There are several benefits of chatbots in banking that leverage AI and machine learning to serve customers better and make more fluent and effective conversations with the customers. AI chatbots in the banking sector can easily provide the consumer with a human-like chat experience while answering their questions.

Chatbots in the banking industry has become a common utility throughout retail banking services as they play a vital role in handling customers using access to real-time data analysis.

In this guide, we’ll list the use cases of chatbots in the banking sector.

Chatbots in Banking Sector: Benefits

Let’s start with how chatbots in banking help retail banks provide a better and more streamlined customer experience by leveraging consumer data and AI.

1. 24/7 Instant Customer Service

One of the most common chatbot use cases in the banking sector is that banks can offer 24/7 online customer support, without having to invest in human operators. Plus, they’re more durable as AI chatbots will end up providing better service than humans.

AI chatbots in the banking sector run state-of-the-art algorithms that can understand and complete the most common commands, over time the AI learns more about customer queries and teaches itself to provide answers to more complex commands as well. This process is known as machine learning.

The more an AI chatbot interacts with customers, the better it’ll become in handling a variety of customer requests.

2. Time and Money Savings

The widespread use of chatbots in the banking sector can help in saving both time and money. Chatbots can work faster and require less training compared to human operators. At their core, chatbots act as virtual financial assistants, helping customers find answers to their problems. This frees up the human operators to focus on more complex problems that can’t be fixed with a chatbot.

With machine learning algorithms, human customer support staff can rely on AI chatbots to get smarter and handle more complex problems raised by customers. This makes the future of chatbots in banking bright throughout the industry.

3. Honest Customer Feedback

Another chatbot use case in the banking sector is that it helps banks get an insight as to what their customers feel about their services. As AI chatbots help out a customer, they can gather valuable customer feedback which can help in figuring out the weak points in a bank’s workflow.

Most customers tend to leave feedback at the end of their conversations with a chatbot. Getting reviews in chats often helps in understanding how a customer is feeling instead of the old-style email surveys. This can help banks and financial institutions significantly improve their customer engagements and improve their most problematic areas. This is one of the best benefits of chatbots in banking.

4. Personalized Offers

Chatbots in the banking sector can assist banks in offering personalized products and services without feeling too pushy. With the higher standards of customer privacy and permissions, chatbots can understand customer transactional patterns and habits.

The data collected from these conversations can be used to provide a more personalized experience to the customers and can even help them learn about investment opportunities and build their financial profiles.

5. Boost Product Adoption

Banks and financial institutions can make their chatbots ask new visitors on a website or customers looking for help if they’re interested in a particular product or service. These service offerings could be anything including loans, savings accounts, credit cards, etc. This customer engagement can provide helpful information for the sales process that focuses on meeting customer needs in a timely way and offers services in a way that feels natural.

The conversational environment via a chatbot can help enhance customer satisfaction with their banks. If a customer is happy with one product offering from their customer, they’ll also be open to getting new products and services from the same bank.

Examples of Chatbots in the Banking Sector

Here’s a list of top banks that are using chatbots to improve their customer interactions. If other banks follow the below-listed examples, the future of chatbots in banking looks great.

1. Bank of America Erica

In 2018, Bank of America unveiled their AI chatbot “Erica”, which also acted as a virtual financial assistant. Erica is available only through the Bank of America’s mobile banking app and it can help customers with simple tasks such as bill payments, credit reports, and getting e-statements.

With time, Erica is improving tremendously. As more and more customers are using digital services, Erica will get to learn more about consumer behaviors. 

2. Capital One Eno

Capital One’s AI Chatbots in the banking sector also come with their mobile banking app, it understands consumer behavior and their preferred way of banking. Through Eno, customers can pay the bill instantly and receive real-time updates about account balances, transaction history, and credit limits. Eno leverages machine learning to gain insights into consumer behaviors and helps customers when they need help. 

3. American Express Amex

American Express credit card holders can connect their cards with the AmEx chatbot on messenger to receive updates and personalized offers. These often include recommendations, payment reminders, exclusive card benefits, and real-time sale notifications.

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Virtual Debit Cards: Everything You Need to Know

virtual debit cards use

As the name suggests, a virtual card isn’t a physical card made of plastic, it’s just a set of sixteen digits like a credit card number combined with a CVV code that’s generated using the software. Virtual cards can be both debit and credit cards.

What’s a Virtual Debit Card?

A virtual debit card is the same as an ordinary debit card, but the randomly generated number is linked to a debit account instead of a credit card. These virtual numbers act just like a debit card and they can also be used to make purchases remotely, although a user can’t use a debit card to make in-person purchases. 

When charges are made using the virtual debit card number, the amount is detected from the linked bank account. However, people can’t trace the number back to the originating account or access money by using the number. 

What’s a Virtual Credit Card?

A virtual credit card is also a series of 16 numbers that are generated at random with a CVV code that these numbers can be used to make goods and services online. Charges can be made with the card numbers online or on the telephone, but you can’t use a virtual credit card in person.

When a card number is generated, the charges are linked to the original credit card number. Similar to a virtual debit card, a virtual credit card can’t be traced back to the original card, and it will not work after the purchase.

What is a Virtual Card Used for Payments?

Virtual card payments are payments that happen online or over the phone without cash or check transactions. These payments are done using the generated numbers securely. 

When payments are made online, hackers who steal the generated numbers will not be able to use them. The numbers stop working after you’ve made the payment and they won’t work to allow access to your accounts or your company. Virtual payments can help to reduce invoices and enhance the payment process.

Who Needs Virtual Cards? Why are they Used?

Virtual credit and debit cards are incredibly famous among consumers and now businesses are also beginning to use them. They are also used to make purchases remotely and prevent fraud. 

Since the numbers are basically throwaway numbers, hackers and thieves have no use for them. When you choose to use virtual credit and debit cards, you can eliminate the chances of card fraud. Your employees also won’t be able to use the numbers to make unauthorized purchases.

Virtual Cards for Business: Good Idea or Not?

The use of virtual debit cards can allow businesses to eliminate the need for drafting checks. They help in saving businesses from fraud and using virtual payment methods can help you save time and money.

The owner of the card can restrict what can be purchased and what can’t be purchased from virtual numbers that you generate. You can also save money on transaction costs that might otherwise be involved with requisition forms, PO (purchase orders), invoice processing, and checks. Using virtual debit cards can also help in streamlining the payments and your expense management. 

Where Can You Use a Virtual Card?

As virtual cards are not physical, they can only be used to make purchases online or via telephone. You can’t take a virtual number to a physical store and expect to pay for goods with it. Virtual numbers can be used online or via telephone to make purchases from companies that accept all the major credit cards including Visa, Discover, Mastercard, or American Express. Once they’re used, the numbers expire and are worthless. If you want, you can set an expiration date that allows purchases to happen for a couple of days, and then the card can expire. 

How Can You Add Money to the Virtual Card?

To add money to a virtual credit or debit card you need to decide how much money you want to allocate to the card from your debit account and credit card from which it originated. The funds are then automatically transferred to the virtual numbers you’ve selected. 

When you see that the balance is low on your virtual cards, you can refund the money by an electronic transfer from your bank account. There’s no need for you to make a withdrawal of cash from your account to add money to your cards.

How Easy are Virtual Cards to Use?

To use a virtual credit or debit card, you can use proprietary software used by your card issuer. You can generate as many random numbers as you need in a few minutes. The cards allow you to assign spending limits by the day or week. 

Once you’ve generated these numbers, you can distribute them to your employees, and your employees can use them to make payments to suppliers of vendors online or over the phone. The numbers can be charged similar to plastic debit and credit cards.

How Safe are Virtual Cards?

As virtual card numbers can be traced back to your account or credit card, they’re much safer to use for buying products and services from unfamiliar online vendors and suppliers. The suppliers or vendors that you pay money to won’t be able to charge you for more than you’ve authorized, thus saving you from fraud. 

Using virtual numbers and cards for purchase provides you with an extra layer of security, if you generate numbers and forget to use them, there’s a chance that someone will be able to steal the numbers before they expire.

Conclusion: Use of Virtual Debit Cards

You should keep in mind that virtual debit cards aren’t plastic, while they’re known as “cards”, they’re just random numbers that are linked to your existing debit and credit cards or bank account. 

No one can use these numbers to make purchases in a physical store using the numbers and you can limit them to single purchases from specific suppliers or merchants. Some businesses use multiple numbers for multiple vendors and only authorized vendors can use these cards.

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Open Banking: Global Developments, Current Landscape, and Future

open banking global developments

If there’s one core element that can be credited for the surge of digital transformation in the financial industry, it’s the global COVID-19 pandemic. It’s more than clear that banks, credit unions, payment providers, and other financial service providers are looking to take advantage of technologies to gain an upper hand against their counterparts. The adaptation of Open Banking has also seen an upward curve in the last couple of years. According to industry experts, the total number of Open Banking users globally will reach 64 million by 2024. 

While there’s obviously a global development of Open Banking in the industry, it’s still the beginning. If careful measures are taken, Open Banking can take the financial situation to a whole new level for businesses and customers.

Revolution of Open Banking

The gist of Open finance is that it provides customers with complete control over financial data which in turn can change the financial habits of millions of users regarding money and savings. 

In the future, third-party service providers, by gaining customers’ consent, will be able to access mortgage data, investment data, insurance, savings, and pension data. Data is the core element in Open Banking and Open Finance. By leveraging this crucial customer data, existing companies of the future will be able to tailor financial services based on customer needs and interests. 

With access to seemingly endless data about customers’ financial lives and habits, there will be no end to personalized services and products. With every FinTech, Bank, and other financial institution trying to build custom products and services, there will be a surge in innovation throughout the financial industry. Ultimately encouraging businesses to leverage the latest tools and technologies as much as possible to stay relevant in the industry while ensuring the best products and services for existing and potential customers. 

Collaborations for a Better Open Finance

Countless businesses across the globe have their own unique take on Open Finance and their own ideas on how to utilize the data to build better products and services for the customer. To help the Open Banking revolution take a better turn, companies across the world need to move ahead with a centralized approach. Without proper frameworks or the incentives to work on Open Finance, it’s less than likely that the industry will be able to utilize the full benefits of open finance.

There needs to be an untied sense of urgency for open banking to take center stage in the financial industry. FinTechs all over the globe are focused on developing Open Banking APIs that banks can collaborate with to enhance day-to-day workflow. Open Banking APIs like online document verification APIs, online proof of address verification APIs, and online bank account verification APIs can streamline the KYC, KYB, and AML workflows. 

Regulatory bodies will need to be more vigilant as open banking becomes more prevalent in the financial industry. With so much customer data open to access, there will be a need to build strong rules and regulations. If we talk about the situation of open banking in the USA, then President Joe Biden has issued a series of customer-friendly executive orders that are primarily focused on ensuring that the US banking system can transition to open banking as seamlessly as possible. 

Australia’s consumer data right offers Australians the right to access all their financial, utility, and telecom data. While it’s true that the open-by-default approach has taken more time to implement than expected, the country is now well on its way to building a strong and secure open banking infrastructure. Another example of the Open Banking revolution is in Canada, similar to Australia, they’ve built a similar plan of action, and they’re expected to roll out their open banking infrastructure by 2023. 

To successfully deliver open banking to consumers on a large scale, there will be a need for collaboration between banks and the government. As the main regulator for most of the firms that would work on the open banking landscape, the regulatory bodies will have to set forth some key rules and regulations. To successfully deliver innovative open banking products and services to the customers, the Bank-FinTech collaboration will be essential. The primary example of this is Open Banking APIs offered by FinTechs globally that can enhance the day-to-day of banks.

What’s Next for Open Banking?

The next step for global open banking is straightforward, it has to be based on a centralized, top to down approach. There have been some great initial steps from regulatory bodies and government entities, but there needs to be a centralized approach to building a proper Open Banking infrastructure. Only then will companies be able to leave traditional banking behind and transition to open banking. Needless to say, open banking and digital transformation are well on their way, the result is just about time.

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Open Source Financial Services: What They Are, What They Offer?

open financial services

Open source has the capability to transform the financial services industry. This evolution will shift the power in the $25 trillion industry from business executives to state-of-the-art developers, not just for FinTechs, but for old-style banks as well.

Before the evolution of digital transformation in the banking industry, building and offering financial services was a tough task. FinTechs and Startups combined with the latest tools and services, inflexible core systems, complex payment architectures, compliance challenges, fraud prevention, and more.

Just imagine, you have financial institutions that rely completely on software that can be arranged and rearranged to build new financial services. These software-based services can be reassembled to support different use cases. This is what Open Source finance has to offer for the banking industry. Open Source offers services for multiple people, isn’t restricted to geographical location, and is freely available for all to use.

FinTechs will have access to the best technologies from all over the world which they can leverage to build an endless series of financial products and services that weren’t possible earlier.

Shifting from Traditional to Banking-as-a-Service

Due to the major challenges and traditional policies of the banking industry, the banking systems have had an expensive infrastructure by relying on an expensive data center. With the help of technology, banking systems are becoming better and less expensive to manage.

Embracing cloud services, online document verification software, online KYC verification software, open banking APIs and others can assist in building a better banking industry. Banking-as-a-service has helped in building and adding financial services significantly simpler and easier. This allows any company in the world to offer financial services without having a financial background.

Encouragement for Future Innovation

While software as a service (SaaS) has helped significantly in rebuilding existing financial products and services, there’s an enormous need for modernization in the digital banking industry.

Financial services used to be just limited to banks, but now any company has the capability of adding financial services in terms of embedded finance. As consumers and enterprise companies have started becoming ambitious in their approach to finance, they will also require more customization to develop innovative solutions for the customers.

FinTechs are more than often locally based, most banks on the other hand are country-specific and they have to operate based on the country’s regulations, infrastructure, and consumer payment preferences. As global companies look forward to boosting their financial services, they’ll need to build global banking applications.

Furthermore, almost 3 billion people across the globe are underbanked and unbanked. Big entrepreneurs understand the need for spreading financial services globally. Immediately accessible open-source financial services library would enhance the process.

The Open Source Evolution

The huge availability of Open Source financial services would help in building products and services that aren’t yet available. For instance, it will be easy to combine crypto and fiat currencies, which will certainly improve digital payments and money transfers. Digital transformation of financial services like Open banking will help in better managing of finance. Flexible, open-source financial services will unleash a plethora of digital products and services.

Change Industry Standards to Increase Reliability

The payments industry has several standards, but most of the services are old and tedious to build. In 2020 over $55 trillion were moved via the ACH payment network. Open-source software libraries will help developers utilize existing services instead of having to spend time from scratch.

Payments usually have thousands of problems, too many for even sizable teams to keep up with. Modern open-source libraries have been made more robust by contributors who run payment through them.

Open Connectivity

Several countries including the UK and Brazil are leveraging open banking regulation in which banks are obligated to create and maintain APIs that enable customers to give third-party applications access to their financial data. Allowing access to financial data will lead to open finance which allows FinTechs to build custom financial services based on customer preferences.

Developers at banks around the world are developing technologies and open banking APIs that can push the banking industry to whole new heights. If banks used a series of open-source software for building open banking APIs, underbanked and unbanked can have better access to the financial service.

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Future of Open Banking: Why Banks Need to Take the First Step?

open banking

The digital revolution for banks and financial institutions is underway at full speed. While the major tipping point for the digital transformation in the financial industry was the COVID-19 pandemic, the seeds of a secure and agile digital environment were available in the industry. Banks and financial institutions were trying their best to keep up with the increasing rate of demand for digital services.

The events of 2020 only pushed the already existing demand for digital transactions and interactions. As banks and financial institutions make way toward digitization, the concept of Open Banking and Open Finance seems even more enticing. Open Banking is sure to help banks stay competitive, provide a series of personalized products and services and enhance the financial institutions to a greater level. 

Open banking is enabling banks to be more innovative and try a thing that has never been tried before. The slow yet steady shift to open banking is underway in Europe, Hong Kong, and Singapore. Consumer protection rights, especially PSD2 which was released in January 2018, are the primary reason behind the adoption of Open Banking in Europe. After President Joe Biden’s statement, the use of Open Banking is well on its way to the USA as well. With a focus on increasing innovation and competition among banks, PSD2 made Open Banking API mandatory for banks operating in the EU. 

The result of this has been a sudden surge in consumer-focused FinTech technologies all revolving around open banking API standards. Open Banking APIs like online document verification API, proof of address verification API, and bank account verification APIs can help banks streamline their most tough tasks (complying with KYC and AML regulations).

Benefits of Open Banking

Open Banking isn’t only for benefiting consumers, the shift towards open banking has given birth to dozens of new FinTechs that are focused on building new solutions that can enhance banking operations. Open Banking APIs are creating a new ecosystem for small, medium, and large scale businesses that can benefit directly by connecting APIs to financial businesses or using the endless data available to provide personalized services to customers. 

While the whole financial industry can benefit from the use of open banking, banks can make themselves the gatekeepers of the one most essential key in open banking: Data. Banks can also utilize this new technology to its extent and enhance their customer business relationships by assisting customers in managing their finances better rather than being a medium for financial transactions. 

Additionally, open banking will allow retail and commercial clients to choose from a broader set of products and services rather than settling for the only option available. The new connectivity among consumers-banks-third party service providers that open banking will make possible will make things better for clients as data sharing will lead to faster lending, smarter lending, and better credit-worthiness assessments. 

Regulatory bodies are already working on guidance for Open banking in the USA, and banks will have the choice of whether or not to invest in this new technology to enhance the customer experience and build a better financial industry. 

According to some industry experts, banks that won’t welcome Open Banking with open arms will only be limiting their customer interactions and also limit the opportunity to be the leader in this newly emerging market. Instead of being unprepared when the regulatory bodies in the USA release guidance for Open banking APIs, banks should start preparing in advance and build their strategies in a way that they can make the most of Open Banking. 

Open Banking is Inevitable

There’s already widespread use of online document verification APIs, Proof of address verification APIs by leading banks and financial institutions. Currently, the EU and the UK are the most dynamic market in open banking all thanks to the EU Policies that facilitated the widespread use of open banking APIs. The Second Payments Services Directive (PSD2) required banks operating under the EU to allow licensed third-party payment providers to bank’s infrastructure and data using a specific open banking API protocol.

By 2022, open banking is expected to generate over $9 billion of profit opportunities for financial service providers. While the US has yet to take a new approach, to generate the same amount of revenue, USA banks need to embrace open banking. 

In the USA, the need for open banking, and open banking APIs has been pushed forward by consumer and business demand. This enhanced level of demand with an enhanced level of activity in the Atlantic is enough for the US to adopt Open Banking. Up until now, the move toward Open Banking has been driven only by regulation, but there’s another approach that banks can take and embrace the Open Banking landscape without government rules and regulations. 

How Banks in the USA Can Seize the Opportunity?

Before pouring millions of dollars into building technologies that can support open banking, the first thing that banks in the USA need to do is to build their strategies. Leaders first identify how open banking can drive value for the bank and what type of return on investment banks can expect, both in terms of revenue and customer loyalty. 

The overall methodology requires banks to secure funding for new investments but also align multiple departments that will be working relentlessly to drive success for the Open Banking infrastructure. It’s a good option for banks to survey customers to gain insights into the type of tools and services they would want to provide their financial data. Mid-market banks on the other hand should use foundational data capabilities to utilize the benefits of open banking. A condition to successfully leverage open banking and gain all the benefits is that banks, financial institutions, and third-party payment providers are to protect customer data at all costs. This isn’t just a requirement for open banking, this is a practice that every bank or financial institution should use. 

In the future, banks will want to focus their investment on their internal infrastructure and ensure that tools, policies, and procedures are in place to support the open banking infrastructure.

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API zur Verifizierung des Bankkontos: Welche Möglichkeiten hat Ihr Unternehmen?

api . zur Verifizierung des Bankkontos

Der Online-Zahlungs- und ACH-Branche fehlt die Autorisierungskomponente, die normalerweise bei Kreditkarten verfügbar ist. Im Gegensatz zu Kreditkarten, bei denen Benutzer autorisieren können, während sie die Zahlung der Kunden über ihre Karten vornehmen, kann die ACH- und Scheckverarbeitung die Bankkontoverifizierungs-API erfordern, um das Zahlungsrisiko zu mindern.

Wenn wir über das Onboarding neuer Kunden sprechen, kann ein fehlendes Verifizierungssystem ein großer Reibungspunkt sein, wenn die Unternehmen wiederkehrende Zahlungen leisten müssen. Die erfolgreiche Überprüfung des Bankkontobesitzes kann sogar die unzähligen Risiken von Finanzbetrug reduzieren. Die meisten Fälle von Geldwäsche passieren, weil Finanzinstitute Strategien und Due-Diligence-Modelle entwickeln müssen, um Fake- und Kontoübernahmebetrug während des Onboardings auszumerzen.

In der Finanzdienstleistungsbranche helfen die Schritte der Kontoverifizierung Unternehmen dabei, zu überprüfen, wem das Konto gehört und ob ein Betrüger das Konto für illegale Zwecke verwendet. Während regulatorische Anforderungen die Banken dazu zwingen, kann das Einhalten von Vorschriften dazu beitragen, das Betrugsrisiko zu verringern und die Kunden-Geschäftsbeziehungen zu verbessern.

Was ist die Bankkontoverifizierung?

Seit der Pandemie ist die Betrugsrate exponentiell gestiegen. Der Grund? Millionen Menschen verlieren ihren Arbeitsplatz und stehen nun vor einer Finanzkrise. Unternehmen, die ständig Online-Transaktionen mit ihren Kunden oder Händlern haben, müssen sich vor Betrügern hüten, die die Identität der Kunden annehmen können. Früher verließen sich Unternehmen, Banken und Finanzinstitute darauf, dass Kunden genaue Bankdaten angeben, und es gab keine Möglichkeit zu überprüfen, ob die bereitgestellten Informationen der Person gehörten, die sie bereitstellte. Manchmal machen Menschen Fehler und geben die falschen Details preis, oder manchmal versuchen sie, Betrug zu begehen, indem sie absichtlich die richtigen Informationen weitergeben.

Aus diesem Grund ist die Überprüfung des Bankkontos von entscheidender Bedeutung. Organisationen, Banken und andere Unternehmen, die in der Finanzbranche tätig sind, müssen die Kontoinhaberschaft überprüfen, bevor sie eine Transaktion abschließen. Die Überprüfung des Bankkontos hilft ihnen zu verstehen, ob die Informationen gültig sind und wem das Konto gehört. Die Überprüfung von Bankkonten hilft sowohl dem Sender als auch dem Empfänger, sicherzustellen, dass das Geld am richtigen Ort gesendet und empfangen wird.

Warum benötigen Unternehmen eine Konto Verifizierung?

Die Beseitigung von Betrug ist der Hauptgrund, warum Banken einen Kontoverifizierungsprozess verlangen. Die meisten Unternehmen, die in der Finanzbranche tätig sind, sind auch an regulatorische Anforderungen gebunden (Unternehmen müssen möglicherweise die Kontoinhaberschaft überprüfen, um die AML-Richtlinie einzuhalten). Die Kontoüberprüfung kann Unternehmen auch davor bewahren, Millionenverluste in Form von Betrugsverlusten und Bußgeldern bei Nichteinhaltung von Regulierungsbehörden zu vermeiden.

Die Überprüfung der Kontoinhaberschaft verhindert das Risiko menschlicher Fehler und reduziert die Zeit- und Ressourcenverschwendung beim Bereinigen der gemachten Fehler. Darüber hinaus hilft es Unternehmen, sich vor bösartigen Akteuren zu schützen, die Betrug wie Geldwäsche, Terrorismusfinanzierung und Rechnungshinterziehung begehen wollen. Die Überprüfung, ob die bereitgestellten Kontoinformationen gültig sind und im Besitz der Person sind, die die Informationen bereitstellt, kann zu reibungsloseren Arbeitsabläufen führen, Zeit und Geld sparen und die Sicherheit vor Betrug gewährleisten.

Verwenden der Kontobestätigungs-API

Die Kontoverifizierung kann auf verschiedene Weise erfolgen, aber nicht alle Methoden sind großartig und so effizient, wie Unternehmen es sich wünschen. Durch die Integration eines API-Schlüssels in die Website können Unternehmen den Verifizierungsprozess verbessern.

Die Online-Bankkonto-Überprüfungs-API von DIRO bietet eine sofortige Dokumentenüberprüfung, die von Unternehmen verwendet werden kann, um die Kontoinhaberschaft zu überprüfen. Mit über 7000 Dokumententypen weltweit können Unternehmen ihren Kampf gegen Online-Betrug verstärken. DIRO bietet eine API, die in die Website integriert werden kann und bei der Überprüfung der Kontoinhaberschaft, des Adressnachweises, der Stromrechnungen und vielem mehr helfen kann.