The Role of Process Intelligence in Open Banking Innovation

Open banking sounds like a contradiction in terms. How can banking – which relies on the most secure processes, safeguarding our most private and sensitive data from financial crime – possibly align with the idea of openness, sharing, and accessibility?

But as the number of digital banking users has grown – projected to reach 80 million in the US alone by 2028, up from 52 million in 2023 – so has the complexity of the financial services ecosystem. Accenture reports that 73% of people engage with multiple banks beyond their main bank, while 58% purchased a financial service or product from a new provider in the last 12 months.

Customers are hungrily taking advantage of the breadth of banking products and financial services that can help them manage their finances better and make their money work harder. And within the last decade, open banking has emerged as a way of greasing the wheels by offering consumers greater control of their financial data. Consumers can now choose to transfer that data between banks and financial services providers, reaping the rewards of more personalized banking products and consolidated views of their finances. Here’s how it works.

What is open banking?

As the name suggests, open banking is literally opening up the closed data that’s traditionally been held by and within each bank. Customers can consent to sharing select financial data, such as their transaction history, with third-party fintech providers via their bank’s APIs, typically with read-only permission.

Open banking regulation exists to address consumers’ data privacy concerns. Third-party providers must be authorized by a relevant regulatory body – a National Competent Authority, or NCA. But since open banking is a relatively new innovation, countries are at different levels of maturity when it comes to this regulatory infrastructure.

In the UK, for example, where banks’ participation in open banking was mandated in 2018, fintech companies can enrol on the Financial Conduct Authority’s Open Banking Directory. In the US, on the other hand, equivalent enforcement has only been proposed by the Consumer Financial Protection Bureau (CFPB) in 2023, meaning implementation of open banking APIs is voluntary and inconsistent.

The benefits of open banking

For consumers, benefits of open banking include being able to make payments directly through shopping apps or websites, as well as getting personalized recommendations for financial products based on their unique situation. They can also consolidate their view of spending and saving. Instead of leapfrogging across different banking apps, streamlining transactions improves consumers’ financial management. They can more clearly see upcoming payments alongside a full reflection of their account balance, while maintaining healthier spending habits without the blindspots of scattered insights. And that benefits institutions and customers alike.

There are other benefits for financial institutions too. When banks support open banking, their customers are less likely to switch banking providers to one that grants greater control and visibility over their financial data and insights. Lenders’ risk management processes also become more robust with real-time insights assessing consumers’ and businesses’ repayment capacity, using a wider range of sources into spending activity.

With so many opportunities for financial institutions to make operations and transactions smarter, while minimizing risk, it’s little wonder that open banking adoption is set to boom. The value of global open banking payment transactions is forecast to exceed $330 billion by 2027, up from $57 billion in 2023. So let’s take a look at some of the innovative open banking applications that are fueling this meteoric rise.

Examples of open banking innovation

Although open banking typically limits third-party providers to just reading transactions and regular payments, this still opens up a variety of use cases. Fintech companies are leveraging open banking APIs to develop specialist apps or inbuilt functionality within consumers’ day-to-day banking platforms, including:

Credit scoring

Open banking technology is streamlining credit scoring by aggregating data from users’ bank accounts, generating faster results that users can receive in their everyday banking app. Lending decisions also become more accurate with more financial data about a user’s creditworthiness – not limited to historic credit transactions – so risk profiles are more sophisticated.

Spending insights

Consumers can use open banking technology to collate all their transaction data into a centralized, at-a-glance view. This clarity can support users’ financial goals, while improving budgeting with modeling on complete, up-to-date information. Banking tools can now analyze a user’s wider spending patterns over time, instead of offering forecasts and historic trends that are restricted to a specific bank account.

Calculators

Combining multiple transaction histories creates more reliable results from affordability and eligibility calculators. This provides budgeting calculators and repayment plans with the context they need to provide accurate and in-depth guidance, reflecting a user’s financial activity and upcoming payments across all their accounts.

Product and service recommendations

By drawing insights from a user’s aggregated transaction history, insurance products can be personalized with tailored rates. This also applies to credit cards that are suited to the user’s lifestyle and habits – whether that’s earning cashback, building a credit score, or spreading the cost of repayments. Innovative fintech solutions can also detect when a user is accumulating high interest, then suggest a more preferential rate offered by an alternative credit product.

Cashback and rewards

Banks can use open banking solutions to improve the efficacy of reward programs and mitigate customer churn. By personalizing offers and incentives based on spending habits revealed by open banking data, financial services providers can increase customer satisfaction and boost revenue through cashback partnerships with retail brands, for example.

One-click payments

Open banking removes friction by connecting consumers from a retailer’s checkout page to multiple banks through a single unified API. Instead of manually entering all their payment details at checkout, an open banking API can securely pull the relevant financial information once the user has selected their bank and been authenticated biometrically. This protects the bank from fraud, while offering a more convenient customer experience.

If banking organizations want to maximize the potential of open banking, however, there’s another powerful technology they should be aware of.

How Process Intelligence supports open banking

Process Intelligence is a spiritual sibling of open banking. Both are designed to consolidate and streamline data while increasing transparency and surfacing insights. And both are designed to unlock value by improving the customer experience.

Process Intelligence is indispensable to open banking services because it enables, standardizes, and streamlines the flow of data within a financial institution. The result? Open banking APIs gain access to unified insights from across the organization.

Here’s how it works. Process Intelligence extracts real-time data from business systems and constructs a digital twin showing how processes are running. This enterprise-wide visibility helps companies pinpoint bottlenecks and disconnected processes. By unblocking these workflows and connecting processes, data flows more seamlessly from the organization and can be made accessible through open banking APIs.

A financial services provider can only fully integrate open banking – and any banking technology, in fact – if its processes are optimized. Otherwise the transfer of data becomes slow and broken, insights are lost or incomplete, and the organization simply can’t support the efficient service customers expect.

With Process Intelligence, however, you can analyze and improve financial processes end-to-end, across different IT systems and business applications. Ultimately, this ensures there are no open goals in your business processes that make open banking fall short of true innovation for your company and your customers.

Find out more about digital transformation in the banking industry, and check out our guide to banking with Process Intelligence.