1. Identity and Account Verification – From Siloed Processes to Seamless Ecosystems

Identity and account verification are the first checkpoints in any digital transaction, whether it’s opening an account, setting up a direct debit, or making a payment. Traditionally, these processes relied on outdated methods like manual documentation, static data checks, or fragmented APIs, which are slow, prone to errors, and limited in scope. Fraudsters exploit weaknesses in outdated systems, creating fake identities or hijacking existing ones to access funds or services. Open banking prevents these scenarios by enabling direct, secure access to bank account information under user consent. For businesses, this means reducing onboarding friction, minimising fraud risks, and ensuring compliance with Know Your Customer (KYC) and Anti-money Laundering (AML) regulations. For consumers, it delivers a smoother, faster experience when setting up accounts or accessing services.

• For instance, Plaid Beacon’s enhanced fraud defence leverages dynamic insights from bank account activity, tackling issues like stolen identities, synthetic accounts, and account takeovers before they escalate​. 
• BNP Paribas’ Personal Data Information Service takes this a step further, showcasing how banks can leverage open banking to offer partners the ability to verify client or contractor data instantly, ensuring transactions and contracts are executed with confidence​.
• Another critical trend is the deployment of open banking in non-financial sectors, such as Deutsche Bahn’s collaboration with Tink, which optimises direct debit account setups for its European customers. This move highlights a growing recognition of open banking as a universal solution to streamline verification in industries beyond finance​.

2. Income Verification – Precision and Inclusion at Scale

Accurate and timely income verification has long been a bottleneck in lending, insurance, and affordability assessments, with traditional processes often resulting in inefficiencies, inaccuracies, and delays, especially for self-employed individuals or those with non-traditional income streams. Open banking has changed this by pulling real-time income and payroll data directly from user-approved sources. For lenders, this eliminates guesswork, as they can assess borrowers’ financial health quickly and with greater accuracy. This also speeds up loan approvals while minimizing the risk of fraudulent or incomplete data. The benefits extend beyond lenders to consumers and businesses, with open banking removing the need for applicants to provide pay stubs or other manual proofs of income for a smoother, faster experience.

• Mastercard’s partnership with Argyle for expanding its Verification of Income and Employment (VOIE) solution is a prime example of this trend. By integrating payroll data directly into lending workflows, businesses can assess creditworthiness instantly, making processes faster and more transparent​.
• Citibanamex’s collaboration with Belvo in Mexico is another move that is helping underserved populations access credit through open banking-powered income verification. This solution eliminates barriers like manual document submission, offering lenders accurate data while promoting financial inclusion​.

3. Fraud and Risk Management – Real-Time Insights to Combat Evolving Threats

Fraud and risk management are at the forefront of open banking innovations, as businesses and consumers grapple with increasingly sophisticated scams. Open banking is equipping institutions with powerful, all-in-one tools that combine real-time data insights and advanced technologies like AI to identify and mitigate fraud before it happens. This proactive approach is particularly vital as digital payments and account-to-account (A2A) transactions continue to rise, leading to a surge in more Authorized Push Payment (APP) frauds.

• Comprehensive risk management tools are gaining traction in 2024, with platforms like Tink and Mastercard responding with all-in-one solutions that integrate account verification, behavioural biometrics, and transaction monitoring. Tink’s “Risk Signals” leverages real-time account and transaction data to flag suspicious activities seamlessly, helping businesses prevent fraud at the point of transaction​. Similarly, Mastercard’s “Scam Protect” combines open banking insights with cutting-edge AI to detect fraudulent behaviour across payment networks, addressing the root causes of scams​.
• A particular area of focus is Authorised Push Payment (APP) fraud, a growing threat in A2A payments. Globally, APP fraud represents 75% of all digital banking fraud in dollar value, with losses in the US, UK, and India expected to double to $5.25B by 2026. Fraudsters exploit users into authorising payments to fraudulent accounts, making traditional safeguards insufficient. Open banking is tackling this head-on by introducing consent-driven verification layers and real-time account validation. For example, Symcor’s Payee Verify evaluates payment risks in real-time, reducing fraud by matching payee account details during transactions​. Similarly, LSEG Risk Intelligence’s Global Account Verification takes this further by using AI and deep learning to match payee details at a global scale, mitigating APP fraud while streamlining cross-border transactions​.

The new regulatory landscape around APP fraud has further intensified the need for robust risk management. In 2023, the UK’s Payment Systems Regulator (PSR) introduced mandates requiring banks to reimburse victims in most cases, with liability for fraud losses now split 50-50 between sending and receiving banks. This shift incentivises both parties to bolster fraud prevention measures, while also indirectly influencing open banking ecosystems. While open banking providers are not directly liable under these rules, adjustments in fraud detection protocols by banks are creating ripple effects. Stricter risk settings and additional verification steps could slow down payment processes and impact conversion rates, particularly for high-value or unusual transactions.