Why open banking is important for consumers to manage their finances

4 min read|Published December 15, 2022
Why open banking is important for consumers to manage their finances

The cost of living looks set to rise before it gets better. As a consumer in the current economic climate, having financial control is more important than ever. Access to the right tools is essential to support consumers struggling to make ends meet. Here’s where open data access and open data economies have emerged as pathways for consumers to minimise financial burdens.

TL;DR – Quick summary
  • Open data access and open data economies enable the creation of actionable tools that help consumers reduce financial burdens.

  • Personal finance management (PFM) solutions like Tink Money Manager create tailored experiences that encourage each customer’s financial wellness. 

  • When combined with inclusive crediting and loan origination, open banking has the power to make lending processes work for everyone.

TL;DR – Quick summary
  • Open data access and open data economies enable the creation of actionable tools that help consumers reduce financial burdens.

  • Personal finance management (PFM) solutions like Tink Money Manager create tailored experiences that encourage each customer’s financial wellness. 

  • When combined with inclusive crediting and loan origination, open banking has the power to make lending processes work for everyone.

It’s no secret that consumers are expecting tailored experiences from their banks. It goes beyond categorising their spending in buckets. On one hand, they are now used to getting smart tips based on their interests and financial circumstances. On the other, they expect more inclusive, fair credit checks.

Financial coaching: how can open banking help?

It’s always crucial to connect with your customers at key touchpoints in your app – even more so when coaching them to achieve better control of their finances. Here’s where financial coaching tools powered by open banking can help. Tink Money Manager is intuitively designed to tailor each customer’s journey, so you’ll better understand their needs while positioning them to optimise their financial circumstances.

With Money Manager’s budgeting features, you can inspire your users to set, manage and personalise budgets for themselves and support them in gaining greater financial control. 

Additionally, you can show users how much they have left of their disposable income and provide an overview of their monthly expenses with Money Manager’s cost prediction feature, Left 2 spend.

In the current economic climate, having a financial overview is more important than ever. But many consumers need a little nudge in order to achieve better financial control. Using Money Manager’s Insights function, you have a clever way of sending customers timely hints across several different features, such as ‘Your balance is higher than usual this month, would you like to transfer it to your savings account?’.

A more inclusive approach to credit and lending

With traditional loan origination processes, those with sporadic or alternative sources of income are often excluded since their solvency may not be immediately apparent from their income and credit history.

Our consumer research has revealed that over a quarter (28%) of the UK’s self-employed struggle to access the financial services they require, leading many to believe the current system works against them due to their employment status. 

The situation is not very optimistic for those who are too young or too new in a given country to have accrued a comprehensive credit history, meaning that those who might really need and deserve a loan – such as first-time apartment or house buyers – will be rejected even though they can afford the repayments. In this way, lending can be an unfair business. In the interest of avoiding too much risk or non-performing loans, lenders typically reject loan applications where the applicant can’t prove their creditworthiness – even if the reason is out of their control and has little relation to their actual solvency.

Open banking data removes many of these bureaucratic barriers. A study from Younited and BCG found that credit approval rates are systematically higher when open banking is used in credit decisioning, particularly for younger and lower-income groups. With Tink’s Income Check, for example, you can verify the income of your applicants, while you can identify the regular expense of someone with Tink’s Expense Check.

Controlling finances is crucial in today's economy. Interested in learning more about how to harness the power of open banking by providing financial coaching and having an inclusive approach to lending? Check out Tink’s income and affordability analysis solutions.

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