Paula Guelfo
Analyst
AMI
Open banking is a concept that has become highly relevant in the financial industry in recent years. It consists in allowing customers’ financial data to be shared securely among different financial institutions through APIs (application programming interfaces), enabling the creation of new services and innovative solutions.
To give an idea of scale, in 2022 open banking generated USD 21.3 billion globally[1] and it is estimated that it will represent up to 5% of the GDP of countries adapting to the exchange of data by 2030.[2]
This, combined with the power of artificial intelligence, has been transforming the way financial data is used, and creating opportunities for both financial institutions and users.
By now we probably all know about ChatGPT, the artificial intelligence chatbot from OpenAI that has become the fastest growing internet platform in history, reaching 100 million users[3] in just two months. Although banks and fintechs have been incorporating AI into their businesses, ChatGPT is a milestone and ultimately marks a before and after in our awareness of applying artificial intelligence more massively.
The evolution of integrations with artificial intelligence tools is giving rise to innovations that allow for more informed decision making, personalization of customer experiences, and directing industry and people toward “self-driving finance.” This trend involves both open banking and artificial intelligence, blending them to produce a range of value proposals for banks, fintechs, and users, with SaaS providers, such as Personetics, Be Smart or Mc Luhan, and consultants to help implementation.
Another level
Hyperpersonalization is something we have been seeing in the industry for a while, and self-driving finance takes it to another level: through data collection, different tools and systems can generate a diagnosis of where different insights relevant to the user are coming from. Then, through financial education, the user can be helped to improve the quality of their financial health, and, if we go a step further, sent a specific, automated proposal about it so that all the customer has to do is give their consent. This way, finances are managed almost on autopilot and generate multiple benefits for both parties.
A clear example of self-driving finance as developed by Personetics is “Money Scout,” a feature of US-based Huntington Bank that analyzes the user’s income and expenditure to detect sums of money the person is not going to need in order to eventually send them to a savings account, generating automated savings. This not only helps the user but also increases loyalty to the company as has a real impact on the person’s economy.
Other benefits
Artificial intelligence is enhancing open banking and generating ever more and better information, leading to:
- Better alternative scoring models, key to financial inclusion in Latin America where, according to Global Findex, just 30% of adults have borrowed money from a formal financial institution.
- Tailored investment recommendation models, e.g., the possibility of estimating a user’s risk aversion and combining this with their financial information to suggest specific investments. In Argentina, for example, according to its National Securities Commission, less than 20% of the population invests.
- Improvements in fraud prevention thanks to the availability of more data and user behavior profiles that could reduce estimated figures, which in the case of financial fraud, according to Fintech Americas, will be around USD 343 billion globally by 2027.
Open banking together with artificial intelligence create the conditions to expand real and profitable financial inclusion for all parties involved. It is only a matter of time before we see how new financial products are beginning to make people’s lives easier and increase and improve the performance of businesses. The key will lie in knowing how to prioritize and effectively develop the right products for specific target populations.
Sources
[2] OIT- PWC – Banca de las oportunidades
[3] UBS
