Navigating The Components Of Open Banking

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White PaperNavigating the components ofOpen BankingHow to create a suitable architecture

White paperNavigating the components of Open BankingCreating value fromyour infrastructureOpen Banking will bring new challenges for lenders- their technology and IT infrastructure. In a datasharing world, security is paramount.Banks that are mandated to share data are carryingthe cost of bringing Open Banking to market. But,everyone involved in the Open Banking ecosystem,including Data Requestors, need to act responsibly toensure that data is used and stored securelyand compliantly.We have outlined some of the key points that need tobe considered to protect customers and delivera great service.Navigating the components of Open Banking Page 3

White paperNavigating the components of Open Banking1.Data sharingOpen Banking comprises of Data Disclosers – such asbanks and credit card providers that must provide accessto data, and Data Requestors – organisations that wantaccess to data to fuel their services.Data Requestors include banks and financial serviceproviders, but also price comparison sites, Fintechs,technology suppliers and payment service providers(PSPs). Less obvious, but equally as interested, areretailers, property letting agents, insurers, utilities andtelecoms providers.Managing connectivity between this network oforganisations, whilst achievable, is going to be complexand sophisticated. Whilst the objective might be access todata, many of these organisations see the management ofdata as peripheral to their business.Page 4 Navigating the components of Open BankingOpen Banking mandates thereal-time sharing of up to 12months of transactional data forconsumers and three years ofdata for businesses. Data canbe exchanged four times a day,for 90 days, before a customeris required to re-confirm theirconsent to share.

White paperNavigating the components of Open BankingHow can data sharing be managed securely and effectively?For both the Data Requestor and the Data Discloser,accessing a data exchange hub which manages the flowof data using Application Programme Interfaces (APIs) isa good solution. These hubs are being brought to marketby Account Information Service Providers (AISPs).The AISPs source data from different providers,aggregate this information and share it with requestingorganisations. AISPs can save time and money and alloworganisations to focus on their core business. These hubswill be purpose built, with all the technical and securitycomponents in mind.The sheer volume of data likely to be exchanged acrossthe Open Banking network will put heavy demands onyour IT resources. Using data orchestration hubs ormiddle-wear that can monitor the data exchange, cachedata requests, manage volumes and reduce the riskof outage can be an efficient solution. Employing a hubmeans you can be consistent and efficient in how youmanage data and use a single resource that can coordinate the information exchange for you.The hubs that provide the best service will be those thatadd value to the data exchange through complementaryservices such as data. For example; customerdemographics, credit scores or asset information canbe added into an application, pre-populating applicationfields and reducing time to approve a loan. Real-timeanalysis of data such as automated categorisation oftransactions can also be used to identify income andexpenditure to help qualify a customer’s suitability andcapacity to afford the loan.Organisations should use these value-added services todefine which technology partners are best placed to helpyou benefit from Open Banking.10 10 A89%Nearly 9out of 10people don’t trustcompanies with theirdata, or believe theywill be spammedby themLess than aquarterof people would share their datawith 67%seeing no benefit at all in sharing itLess than a thirdof people have a positive association withcompanies about their personal dataNavigating the components of Open Banking Page 5

White paperNavigating the components of Open Banking2. Verifying identitiesThe need to acquire customer consent prior to sourcingdata means that verifying a customer’s identity is crucial.Aligned to Open Banking is Payment Services Directive 2(PSD2). This outlines the criteria, process and governancefor aggregating and initiating remote payments (knownalso as ‘card not present' payments).Subject to various parameters (such as the fraud levelsof a payment provider or the transaction value), PSD2introduces Strong Customer Authentication (SCA).This means you need to obtain two forms of identityverification. This could be something you:The identity of a customer will be subject to furthervalidation checks, with an expectation placed on paymentproviders and Data Requestors to check device and frauddatabases as an extra measure of validation.How can you build on your identity controls?Agile, multi-layered fraud controls such as Experian’sCrossCore can help. Developed around an API you can addnew functionality to the platform as and when required.Integrating device recognition, document verification andpayment checks can provide a seamless process that isembedded into the customer journey.Read more on Experian’s CrossCore solution Knowfor example a pin numberor password******Havefor example a security token ora pin reader678910Arefor example a fingerprintor biometricPage 6 Navigating the components of Open Banking

White paperNavigating the components of Open Banking3. Consent – be your customer’s best friendConsent is at the heart of Open Banking and is mirrored inthe EU’s General Data Protection Regulation (GDPR).In order for you to receive data, you need the customer'sconsent. You need to understand and store the caveatsassociated with that consent, such as the length of timeyou’ll store the data and the purpose for which the datais being used. Freedom and control must be given to thedata owner so they can manage (or withdraw) consenteasily, at any point in time.How can you manage consent?Tools such as providing consent receipts or a consentdashboard can help. These tools can allow customersto check what consent has been given. This providesgreater transparency and can help you to build customerconfidence too.Watch our video on how a consent dashboard will helpthe customer Data sharing is a sensitive subject. Ask anyone if theyare happy to share their personal data and you’re likelyget a 'no'. Why? Because many customers don’t fullyunderstand what they have agreed to share and datarequestors have not always been open about the purposefor which the data is being used.Transparency on the use of data, security and control isparamount in Open Banking if customers are going toshare their personal information and for you to build trust.Navigating the components of Open Banking Page 7

White paperNavigating the components of Open Banking4. Make every interaction countPeople’s financial lives are often complex and sophisticated.With nearly 7 out of 10 people using different companiesto provide their financial products, getting a completeunderstanding of someone’s financial status canbe challenging.Every interaction, and every action, needs to consider theindividual behind the transaction. You need to be timely,transparent and fair in your engagement and it needsto be effortless for the consumer. You need to be quick,efficient and streamlined. A single customer view helps tofacilitate this.How can you utilise the data you have to inform yourdecisions? Can you understand a person’s needs andwants through their financial habits? This is wheretransactional data sharing comes into its own.A key differentiator will be your ability to achieve aconsolidated view to inform the right action.Experian’s Expin enablescompanies that hold consumerinformation across multipledatabases to link together thisdisparate data into a single,integrated view. In addition, itcan match external data to acustomer record to enhance yourunderstanding of an individual.Page 8 Navigating the components of Open BankingHow can you achieve a single customer view?Pinning can help you stitch together multiple data sourcesinto a single, consolidated view. It can also help you betterunderstand your customers' finances by consumingand rationalising multiple complex feeds of information.Experian's pinning tool ExPin enables you to integratethe information you’ve gathered on your customerswith external data sources such as credit scores, bankstatements, savings or the value of an asset to create amore complete picture of an individual.Read more on ExPin

White paperNavigating the components of Open Banking5. Make the most of technologyArtificial intelligence, machine learning and data scienceare being applied throughout the industry to generatesignificant value. These techniques allow you to analyselarge datasets and generate actionable insight quickly.This insight is being used to enrich customer experiences.Data is being used in financial services to categorisetransactional data from bank and credit card statements.This automated analysis can be used to confirm aperson’s income and expenditure. It can then be used topersonalise and inform a lending decision. The result ismore accurate as it is trained to use the most relevantdata, but it is also more efficient as it is less dependent onthe manual interpretation of data.How can you take advantage of technology?Dynamic decision strategies aren’t new. Software canbe used to help you automate and make decisions. It canalso be adapted to accommodate any future changes inlending rules or customer behaviour. By its very natureit provides an open, intuitive and flexible way to improveand optimise your decision making. By using purposebuilt technology you can enhance your decision-makingacross the entire business and make sure every decisionis personalised and appropriate for the customer.Learn more about PowerCurve 6. Lend responsibly throughoutthe relationshipData sharing isn’t limited to supporting a productapplication at the point-of-sale. Using data throughoutthe lifetime of a loan can help inform you of any changesto a person’s financial circumstances. For example, arethey showing signs of financial strain? If they are, and youcan see this (proactively rather than reactively), then, withtheir consent, you can review a customer’s transactionaldata and obtain a more detailed assessment of theirability to meet their repayment schedule.Should you need to, you can review their credit terms,amend payments in response and help them to regaincontrol. On the flip side, for those customers who areshowing an up-turn in their financial status you can usethis insight to pre-qualify them for additional products,or re-calibrate their current ones by changing their creditlimit or interest rate.This will help ensure you lend responsibly. It will alsohelp you build trust with the customer and add value toyour brand.How can you respond to the right needs of your customers?Pre-qualification can be very useful to pre-empt anindividual’s financial status and ascertain theireligibility for a product at the start of a customer journey.You can increase conversion, improve satisfaction andreduce the risk of delinquency in the life of a loan byusing insight generated from their transactional data toidentify the products that best match theirfinancial circumstances.Learn how pre-qualification can help you Anticipate the future needs of your customerswith FutureView Navigating the components of Open Banking Page 9

White paperNavigating the components of Open BankingAbout ExperianExperian unlocks the power of data to createopportunities for consumers, businesses andsociety. At life’s big moments – from buyinga home or car, to sending a child to college,to growing a business exponentially byconnecting it with new customers – weempower consumers and our clients tomanage their data with confidence so theycan maximise every opportunity.We gather, analyse and process data in waysothers can’t. We help individuals take financialcontrol and access financial services, businessesmake smarter decisions and thrive, lenders lendmore responsibly and organisations preventidentity fraud and crime.About the authorRob has spent most of his working life associatedwith the commercial use of consumer and businessinformation, helping organisations understand moreabout their customers to optimise their engagement.His latest projects include co-ordinating theimplementation of a new insolvency score tomonitor the financial health of UK pension providersand establishing a real-time data sharing networkfor banks in the UK and abroad. This includes useof Open Banking Standards (OBS) and employingtransactional data to provide a better measure ofaffordability for consumers and businesses.Rob HaslingdenHead of Product and Propositions, ExperianConnect with me:Page 10 Navigating the components of Open Banking

Open Bankingchanging lending as we know it10The advent of Open Banking in 2018 brings new payment servicesand transactional data sharing to the forefront of lenders operations.What's changing?To implement this new infrastructure, certain steps and certaincomponents need to be considered. Let’s look at what's changedand what's reinforced:CompetitionOpen Banking will bringcompetition to theforefront of bankingTransparency Clear, fair and transparentcommunications are essential Customers will need to see the valueof any product they own, or wantData sharing Customers will now be able to share theirtransactional data with accredited organisations.To do this, you require their consent. To get their consent you need their trust To store and manage their consent you needa dashboard To facilitate this you need flexible, secure APIslinked to strong customer authentication and asingle customer viewCredit risk Transactional data along with credit scoreswill help lenders conduct more accurateaffordability assessments. Lending rules such as credit limits and interestrates will be personalised based on the analysis ofan individual’s transactional data Transactional data and credit scores can beassessed throughout the lifetime of a loan,pre-empting any changes in a customer’spersonal circumstanceValueProviders will analysea customer’s financialbehaviour and find the bestvalue products that meettheir individual needs

10 10 Customer value Timely, relevant andpersonalised communicationsare important Fair and appropriate lending,based on an individual, is criticalCustomer supportIdentity verification When making remote purchases (such asonline shopping), payment providers will needto authenticate using multiple factors. This isstrong customer authentication When requesting or sending customer data,being able to verify the request is legitimatewill be essential.Data managementSecurity Storing and sharing data needs tobe done so with the utmost protection. Everyone involved in theOpen Banking ecosystem has aresponsibility to secure data andcomply with regulations A single customer view is now essential. You needto be able to send ALL data on an individual Likewise, the receiver of this data needs to be ableto integrate it into existing data to create a complete,single customer profileWhat's reinforced? Managing data responsibly and resolvingcustomer problems quickly are key to buildingtrust and confidence Building cross-divisional infrastructures thatenable any customer facing team to accessa succinct set of data will better support thecustomer and their outcomes

Registered office address:The Sir John Peace Building, Experian Way,NG2 Business Park, Nottingham, NG80 Experian 2017.Experian Ltd is authorised and regulated by the Financial Conduct Authority. Experian Ltd isregistered in England and Wales under company registration number 653331.The word “EXPERIAN” and the graphical device are trade marks of Experian and/or its associatedcompanies and may be registered in the EU, USA and other countries. The graphical device is aregistered Community design in the EU.All rights - 918 - 0757

Open Banking will bring new challenges for lenders - their technology and IT infrastructure. In a data sharing world, security is paramount. Banks that are mandated to share data are carrying the cost of bringing Open Banking to market. But, everyone involved in the Open Banking ecosystem, including Data Requestors, need to act responsibly to ensure that data is used and stored securely and .

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