How Does Account Verification Work With Open Banking?

Luke Fitzpatrick

Whether you're familiar with open banking, banks and third parties have had to verify our accounts for decades. Traditionally, if you want to withdraw money from your bank, you might present a bank card or an ID at your local branch.

The world of open banking is no different. Except, users can now verify their accounts within seconds and explore everything open banking offers.

What is account verification?

One of the biggest worries users have with online banking and digital finance products is the perceived lack of security. Account verification means checking who you say you are.

In terms of banking, companies have to check that the individual owns the account they claim to, which is for the users' safety and the bank's integrity.

Account verification enables users to connect their bank accounts to third-party apps. However, open banking has to verify your account, just like any other financial institution.

With a two-step verification process, users choose their bank, consent to sharing data, and access their financial information through a third-party app.

The advantages of account verification for individuals

Despite only officially launching less than two years ago, Australia has 27 banks providing open banking today.

Like all aspects of open banking, account verification is fast. Users can consent to share their data within just a minute and begin taking advantage of open banking.

Managing finances

Open banking enables financial institutions to offer a far more comprehensive range of bespoke products to improve the user experience.

Banks can provide personalized advice and insights about each user's spending habits. Consumers can view data-driven dashboards to help them make financial decisions.

Nearly 40% of Australians applied for finance in 2019. Two years later, with open banking available to third parties, the process is much faster. With personal management apps and easy access to credit, users can take control of their finances.

Faster onboarding process

Signing up for new banking software or opening new accounts might remind you of stacks of paperwork. Even with today's technology, verifying accounts involves sending physical bank statements and identification.

However, open banking allows customers to verify their accounts instantly. No one will need to follow any cumbersome processes anymore, saving time and effort. Additionally, with open access, affordability checks and forms are automated.

The advantages of account verification for businesses

Open banking and account verification also benefit businesses. For example, a credit lending app might request access to all users' accounts to assess their financial position thoroughly.

The credit provider creates a tailored product based on the user's financial data. In this instance, account verification is vital to ensure that someone doesn't apply for a loan fraudulently.

KYC and AML

Whether businesses have to comply with Know Your Customer and Anti-Money Laundering or not, it's good practice to protect yourself and your customers. Secure account verification will save businesses from fraudulent users.

Account verification processes shield companies from human error. Manually uploading financial documents and inputting account numbers could result in costly mistakes. Further, it could lose you, customers.

While open access and open banking suggest a lack of privacy — it's far more secure than other financial platforms.

Money and time

Automating account verification saves time and money. It enables financial companies to scale and continuously improve the user experience.

Businesses can pool their resources towards more critical avenues with customers verifying themselves directly through the open banking platform.

Plus, more and more startups can break into the finance sector. Once an elite industry, now an open market for app and software developers.

Summing up

Open banking and account verification are efficient. And efficiency is at the heart of everything. Saving time, money, and effort enables users and businesses to benefit.

More companies can offer their services, scaling as they do. Meanwhile, customers can enjoy greater choice and flexibility with their financial decisions.

On top of that, open banking is as safe and secure as it can get. A two-step verification process enables businesses to trust the customer is who they say they are without wasting resources or customer time.

Comments / 0

Published by

Academic Speaker | Freelance Journalist | I have contributed to a variety of publications such as Forbes, Tech In Asia, and The Next Web. I cover a variety of topics ranging from fintech, big data, AI, blockchain, to lifestyle and breaking news stories.

210 followers

More from Luke Fitzpatrick

Comments / 0