Open Banking. Financial Inclusion! Redefined!

Over 80% of workforce in Developing economies operate in the Informal economy, often denied access to Formal Banking and credit. Open Banking facilitates Cash Flow and Net Worth based Financial Inclusion to deliver all round social development

Open banking is the third wave of true innovation in financial services, with big opportunities for banks to develop a holistic view of their customers’ finances and create deeper, more profitable lifetime customer relationships. We are seeing the industry move rapidly from the first generation of Open Banking, first developed as a regulatory framework in the European Union and the UK, to a more sophisticated level of Open Banking when 16 countries started the first initiatives of open banking, with a focus on the infrastructure, regulatory framework (first developed in the EU and UK) and developing the right standardizations for how to use shared APIs to give customers more options and flexibility over how to use their financial data.

Today more than 60 countries worldwide are using open banking. With Second generation Open Banking, not just banks but fintech, wealth management firms, insurance companies, and other financial institutions are looking to create business impact by better understanding their customers. A recent article from Forrester offers examples of how Open Finance is creating new opportunities in several verticals:

- Insurance: better data-sharing could help insurance companies evaluate risk more precisely and give customers dynamically adjusted premiums with personalized actuarial models. If you choose to travel at less-risky times of day or on lower-risk roads, this could be reflected in your car insurance costs.

- Inclusive Credit Products: open banking could help identify new inclusive credit offerings for underserved customers, by using shared data from delivery and ride-hailing apps. This can help banks manage credit risk and identify creditworthiness for customers who might be excluded or underrepresented by conventional credit reporting agencies.

- Contextualized, Personalized Suggestions: Open banking and open finance will help pull data together in real-time across multiple sectors and create personalized insights and recommendations. Whether a customer needs a loan, mortgage, investments, insurance, or other financial products, open banking can help banks serve as a trusted advisor to recommend the right product at the right time.

- Financial Inclusion: Open Banking can play a crucial role in Financial Inclusion. Current Lending models depend heavily on Credit History to determine Credit rating which has been working well in Formal economies. However, those serving in Informal economy remain excluded from availing Institutional Credit due to legacy credit rating practices. Developing economies compound the issue due to low penetration of Banking systems, leaving 70-90 % of population with little or no access to bank credit and at the mercy of loan sharks. Such imbalances can severely dent overall economic growth and delay achieving SDG goals. A level playing field for MSMEs in the informal economy to avail bank credit for economic growth.

Cash Flow and Networth based Ratings

Banking Banks have been the largest databases of all consumer data and their transactions, ranging from income, utility payments and purchases for the last few decades. However, Banks’ data is stored in islands and prospective customers’ credit ratings are determined by loan repayment history of the borrower at the time of borrowing. A Loan repayment history-based Credit Rating does not represent a customer’s current cash flow and net worth. Further, such credit rating systems are ineffective in economies with large populations engaged in the informal economy.

In the European Union, the United Kingdom, South Korea, Australia, and India, governments have mandated large banks to open their vast troves of customer accounts to other companies, in a bid to stimulate competition. In the United States and China, it is a market-led movement, with companies establishing open-banking relationships among themselves. Singapore is using a blend of the two models. Open Banking provides an alternative to current Credit rating systems by providing a 360° view of customers based on cash flows and assets, thus based on a customer’s current. Open Banking systems allow Requesters to seek user data through the Open Banking platform from User Data providers with User Consent. Data Providers will obtain user consent before sharing data with Requesters. Users have complete control on data being shared. The entire process maintains transparency, immutability and user privacy while providing requested data.

Over seventeen governments and central banks have passed legislation and notifications for Open Banking, opening new markets for fintech and financial services opportunities. Aurigraph Open Banking platform will enable Fintech developers, financial institutions and online lending and micro finance service providers to rapidly build applications and services to expand reach and volumes.

Aurigraph Open Banking platform

Aurigraph DLT is an RBI approved Sahamati Technology Services Provider for Account Aggregator.
Integration with over 13000 Banks, financial institutions, Sovereign Identity providers and data providers across India, Asia, Europe, and North America
High Availability platform ensures zero downtime
Super scalability with over fifty thousand Transactions per second and low latency
Future proof security with Post Quantum Cryptography for secure data
Platform to deliver low TCO Account Aggregator services.
- Fixed Transaction Fee!
- Cloud-based Open Banking SaaS

Aurigraph is the first DLT based open banking platform offering decentralized nodes for every individual subscriber, ensuring complete user-controlled data privacy and confidentiality. With its decentralized architecture, it offers unlimited scalability and throughput. Aurigraph Active Contracts aid in very rapid contract automation and deployments, ensuring elevated levels of compliance.

Aurigraph Account Aggregator

Users can complete their eKYC and link their financial data from various data providers to complete their 360-degree profile. When applying for any financial product or service, a financial service provider would need to merely sign a tokenized smart contract seeking a user’s financial information. The request will be routed to the respective financial information provider and delivered to the Requester after user’s consent. All activities are logged onto the Immutable Ledger, providing complete transparency, immutability, and non-repudiation. Each smart contract will be powered by Aurigraph tokens to pay for Transaction fees, taking care of fulfillment and reconciliation of the Request. Aurigraph Account Aggregator platform can reduce the cost of verification and disbursement of funds by over 90% while engaging Aurigraph using a OpEx model. The key USP of Aurigraph Account Aggregator being in-built settlement and reconciliation with extremely high throughput and low latency with real-time reconciliation and settlement