This is what Account Information Services (AIS) gives businesses today - insight into the transactions and balances of your customers via an API. Along with open banking payments, AIS is one of the two foundational initiatives that have been brought about by Open Banking and PSD2.
In this post, we share a selection of reasons why a range of businesses – lenders, utility or subscription-based companies, financial services, fintechs, and many others, may want to think about adopting AIS to optimise their processes, improve their decision-making, and, in some cases, even transform their business.
How it works
First it helps to understand the basic flow of how you are able to access customer account data.
- Your user provides consent for you to retrieve their transactions and balance data.
- The user is automatically redirected to their bank to authenticate access.
- An open banking API providers such as Yolt fetches the transactions and balance data for you.
Understanding the potential of AIS
One other thing should be noted before diving into the advantages of AIS, is that where open banking payments have a range of obvious benefits that can apply to almost any business online, AIS is not so clear-cut. Rather than a plug and play product, utilising AIS data for maximum effect often requires planning, organisational change, and even creativity and imagination. However, the payoff can be spectacular – in one of our cases below, we even show how one business is disrupting an entire vertical.
Without further delay, here are eight key advantages of AIS for businesses of all shapes and sizes.
1. Make faster, better decisions by objectively understanding your customers’ financial profile
If your business requires identity verification and credit checks before onboarding a customer, such as a mortgage, personal, or business lender, or even a utility company, you deal with a lot of manual processes and unstructured data, such as pdfs and disconnected files being shared by email or other means. With this unstructured data, you need manual processes and valuable employee time to go through and make sense of an applicant’s financial profile.
But with AIS, you can automate these processes and make decisions based on objective data directly from your applicants’ bank account. This is a big deal in terms of time saved. According to Yolt research, this automation can reduce processing times on borrowing applications by 85%, saving lenders thousands of hours a year. With this saved time, you can hypothetically onboard far more new customers with the same number of staff and amount of overhead – all the while making more accurate decisions.
2. Know when to bill your customers
Utility companies, subscription services, and lenders are just some of the businesses that often charge a fixed amount each month. However, many customers are billed in the days leading up to when their income is deposited, or other inconvenient times such as after large expense are paid. And a number of these customers, though not necessarily financially stressed, may be short on cash at these moments.
With AIS data, you can automatically identify which the best day of the month is to initiate a payment (most likely shortly after their main income is deposited), based on their transaction history, and create a recurring payment on that day. This has the potential to save significant amounts of money and time currently wasted on chasing customers with letters or on the phone, and also reduces pressure and stress on customers.
3. Personalise, cross-sell, and up-sell
Access to account data offers many possibilities to personalise, cross-sell, and upsell to your consumers or businesses customers.
For example, lenders can easily offer personalised loans based on what is actually happening in an applicant's bank account, even if they are self-employed or have irregular intervals of income. This ability can, among other things, enable lenders to reach a greater market share of people who are unable to access traditional forms of credit. This is a significant group - numbering 6-8 million in the UK, for example.
Or if your business offers multiple product lines, such as insurance as well as loans, based on the data gathered for the loan application, can be used to make further offers in insurance products that will suit their specific financial profile.
4. Build relationships, not debt
A customer who is always able to pay their bill on time and with minimum difficulty is more likely to stay with you, spend more over a longer period, and perhaps even tell their friends and family about your business.
AIS can help ensure you are building relationships rather than placing undue financial stress on your customers due to inaccurate data. For utility companies, you also are able to know upfront which of your customers may be financially vulnerable, and assign them to the right product or tariff.
5. Differentiate your offering
On the more creative end of the scale, some fintech and financial services business can leverage AIS to innovate products and differentiate their offerings.
For example, KEEBO is a new-generation credit card that helps users with little credit history to access credit, by leveraging open banking-based underwriting. With AIS, it is able to look at a customer’s broader financial behaviour and wellbeing to assess their creditworthiness.
Another example is personal finances apps. With AIS data, personal finance apps can offer a range of features, such as:
- Show how much room users have to save and invest.
- Enable users to create and track savings goals.
- Predict negative balance, so users don’t spend on unnecessary things, or can take other action to avoid it.
- Calculate the impact of increases or reductions in salary due to changing jobs, working less or more, or losing a job.
- Provide cost comparisons so users can find better deals.
- Calculate credit possibilities for users' personal or mortgage loans.
And many more – the limits are still being explored.
6. Create a flywheel effect with open banking payments
A “flywheel” is a type of mechanical wheel that can continue to turn by itself once it reaches a certain momentum. In business, the concept is that different initiatives can reinforce one another – and build up their own momentum.
A version of a flywheel is possible with open banking – especially for businesses such as utilities and lenders. As mentioned above, with Account Information Services, you are able to offer them the right product based on their financial profile, and bill them at the moment they are most likely to have cash in their accounts.
However, this is not the only way to ensure more of your customers pay on time. On the open banking payments side you can offer automated recurring payments, or – if they miss a payment – following up with a QR code or text message that redirects your customer directly to their in-app bank environment. The seamless payment experience leads to improved conversion, which reduces debt recovery costs – a big drag on expenses in these types of businesses. This in turn further lowers the cost of doing business, and enables you to grow profits or invest more in product or sales and marketing, and so on.
7. Buy into innovation – with Cashflow Analyser and more
Some open banking providers, such as Yolt, are building innovative front-end services on AIS data, so businesses can access insights quickly.
For example, Cashflow Analyser is an online tool that helps lenders and leasing companies leverage open banking to provide immediate insight into the cash flow of applicants. This makes it much easier for both your customers and yourself to access the most important data at a glance.
This type of innovation will be continuous over coming years, as open banking providers such as Yolt compete to build out new products and services to help businesses of all types better understand their customers’ financial profile.
8. Disrupt your vertical
It is possible to disrupt entire verticals in some specific cases, with the right innovation.
In fact, the smartest businesses have already evolved beyond simply improving the existing customer experience and their own processes, and are instead taking the basic building blocks of open banking APIs to power hockey stick growth.
A case in point is small business accounting software provider Jortt. In a saturated market, this company has built its entire product on open banking connections, and this strong point of differentiation - which includes drastically reducing the amount of work small businesses need to spend on accounting - has translated into 40-50% year-on-year business growth. Its impact is not only limited to saving customers time, either. With Jortt, small business accountants can also scale their own offerings, and serve up to 10x the number of clients they do with existing software solutions. You can read the Jortt case study here.
We are only at the beginning of the open banking innovation super cycle
Many new technologies take off, as the adage goes, two ways; gradually, then suddenly – think smartphones, cloud computing, and more recently, electric vehicles.
The above points represent a number of use cases and examples of how businesses are leveraging the possibilities offered by open banking Account Information Services. But the real innovation cycle is only just beginning.
To find out how open banking could help you improve CX or internal processes, differentiate your offering, or perhaps even disrupt your vertical, contact us.