Open Finance is a concept that has recently gained popularity in the field of economics, but do you know what it means and why it appears to be a popular term in that environment?

What is Open Finance?

The financial sector has been preparing the ground for open schemes in order to benefit from data that may be shared across several entities.
This concept evolved from Open Banking, which was founded on APIs to allow banks to share financial information about themselves and their customers with third parties who requested it, with the approval of individuals who shared it.

The goal was for those financial institutions requesting the data to put together financial products and services for those who made their data available, by better understanding their profiles.

Following that, Open Banking evolved into Open Finance, which represented a larger concept in which data interchange expanded beyond banks to include insurance, wallets, pension funds, fintechs, and other service providers.

It is a figure awaiting adequate regulation in the country, but it is functional and has benefits, so much so that it is envisaged that in 2022 the income generated by the open finance scheme will reach a total of 9,870 million dollars, of according to the Belvo report: Open Finance Trends in 2021.

It’s an encouraging number, but why would it be reached? To grasp this, you must first consider the model’s benefits.

6 benefits of the Open Finance scheme

1. Easier account opening

The fact of having a bank account can give people or companies access to the contract for various services in different financial institutions, since they can quickly and reliably consult the requesting party’s information and become a new client.

2. In-depth customer profile

With so much cross-data, financial institutions can better understand people’s economic behavior, such as how they conduct transactions, what products and services are most in demand, and so on, which is important for the following considerations.

3. Broader financial inclusion

A lot of financial data is useful for creating a complete map of individuals as possible clients, which motivates credit or banking institutions to adapt to what they see and introduce services that are more relevant to people and businesses as a result.

4. Service and product personalization

Similarly, they can go even farther and offer enticing and exclusive personalized programs that develop loyalty and adapt to their capabilities by understanding the behavior and demands of users, applicants, or potential clients.

5. Automated processes

The customer experience improves as a broad network of information flows from one location to another, allowing for more efficient resolution of requests, less paperwork, and shorter response times.

6. Better credit risk assessment

It is easier to evaluate risk variables with the use of APIs that collect data, thus a bank or financial institution may defend itself quite well using this strategy.

The CRiskCo API enables organizations that make loans to take use of what Open Finance has to offer, providing them with a detailed risk assessment of their applications to avoid problems. Learn about this interface and its benefits.