Use Cases of Open Banking: Personal Finance Management, Credit Scoring, and Account Aggregation

Open Banking is reshaping the financial landscape by offering better access to banking data through secure APIs. Let’s explore some detailed use cases of Open Banking and how they benefit consumers.

1. Personal Finance Management (PFM)

Open Banking empowers personal finance apps to help users track, analyze, and manage their finances more efficiently.

• Expense Tracking and Budgeting: In India, apps like Walnut and ET Money leverage Open Banking to pull in data from various bank accounts, credit cards, and investments. These apps automatically categorize expenses, provide insights on spending habits, and allow users to create personalized budgets.
• Investment Monitoring: Tools like Scripbox and Groww make it easier for users to manage and track their mutual funds and investments in one platform, without having to log in to multiple portals.

Example: Imagine you’re using Walnut, and all your bank accounts, credit card transactions, and monthly subscriptions get automatically organized in the app, helping you stay on top of your spending without having to manually enter any details.

2. Credit Scoring

Traditional credit scores rely on credit history, which may be limited or inaccurate for some users. Open Banking allows lenders to access a user’s broader financial data, including income, spending habits, and bill payments.

• Expanded Credit Data: Fintech services like CRED and MoneyTap assess real-time bank transactions and bill payments, offering a more holistic view of a user’s creditworthiness. This is especially important in markets like India, where many individuals may not have a traditional credit history.

Example: If you regularly pay your utility bills and rent on time, apps like MoneyTap can factor this into your credit score, improving your chances of getting approved for loans, even without a lengthy credit history.

3. Account Aggregation

Account aggregation allows users to access multiple accounts, investments, and loans from different banks in one app.

• Unified Financial Overview: Platforms like MoneyView and IndMoney provide a consolidated view of all financial assets—bank accounts, fixed deposits, insurance policies, and mutual funds—giving users a complete picture of their finances.
• Cross-Bank Transactions: Open Banking also facilitates quick and easy transfers between accounts from different banks without leaving the app, further simplifying money management.

Example: Let’s say you have savings accounts in different banks and a few fixed deposits. Using an app like IndMoney, you can see all your accounts in one place and manage your portfolio without logging into each bank’s app separately.

4. Streamlined Loan Approvals

Open Banking simplifies and speeds up the loan approval process by giving lenders access to real-time financial data.

• Instant Eligibility Checks: Instead of waiting for days for loan approvals, fintech apps can instantly assess your financial situation and approve loans within minutes by analyzing real-time transaction data.
• Affordable Loan Offers: By analyzing a user’s income and spending patterns, lenders can offer more affordable, personalized loan terms.

Example: If you apply for a personal loan through an app like LazyPay, your bank transaction history and spending behavior could help the lender instantly approve your loan without the need for lengthy paperwork or credit checks.