The introduction of The Second Payment Services Directive (PSD2) across Europe in 2018 kickstarted a number of exciting innovations around how consumers interact with multiple banking services.
While the sensitivity of financial information means traditional banking services require siloed security systems that customers traditionally access through in-store branches or mobile banking apps, PSD2 opens doors to a new era of ‘multibanking’.
Multibanking harnesses the benefits of secure data flows through Account Information Services (AIS), seamless transactions via Payment Initiation Services (PIS) and enriched analytics from Account Insights to create a single interface that connects multiple bank accounts through a single interface.
So, how is multibanking changing the way customers interact with their money, and why will Open Banking play such an important role in the development of multibanking solutions?
What Does Multibanking Mean for Financial Services?
While the transition from physical bank statements to online banking represents the digitisation of banking, the ability to consolidate and control multiple accounts through a single interface will fundamentally change the customers’ relationship with financial service providers.
A handful of Third Party Providers (TPPs) have developed cutting-edge personal finance management apps that serve as a central node to connect multiple accounts. The ultimate goal of multibanking platforms is to become the ‘go-to’ destination for customers to manage their funds and interact with their accounts.
As individuals and small businesses continue to harness the power of multibanking and cherry-pick financial products to suit their specific needs, traditional financial service providers must rethink how they build customer loyalty.
5 Benefits of Multibanking
Reducing direct engagement between end-customers and financial service providers empowers customers with a better financial overview and unlocks a host of benefits to boost customer experiences.
Here are five key benefits of consolidating multiple accounts through a single banking interface:
1. Dynamic Search Across Connected Accounts
If an end-customer uses multiple accounts across a range of banking providers, retrieving information about a specific transaction, spotting duplicate payments, or conducting an audit of historical transactions can be extremely time-consuming.
Account Information Services (AIS) through Open Banking allows third-party multibanking providers to retrieve key account information and create a searchable database.
With the European Central Bank recording forty-four billion retail transactions across the continent in 2018 alone, searchability is vital to cut through the noise and stay in control of personal finances.
Dynamic search across multiple accounts improves financial visibility and audibility to help customers filter through pages of data and find exactly what they’re looking for in the click of a button. The best account aggregation software will include intelligent search filters to help users narrow their search parameters and manage financial information with pinpoint accuracy.
2. Central Data Management & Enhanced Security
Accessing multiple accounts through a single interface negates the need to use different log-ins for individual accounts and simplifies authentication processes by providing a de facto gateway to multiple accounts.
PSD2 legislation centres around data privacy and security to help TPPs embrace Open Banking in a responsible and reliable manner. Approved third-parties must comply with strict regulations and Strong Customer Authentication (SCA) to bolster verification measures and provide a stable foundation to support future Open Banking applications.
From a user experience perspective, centrally-managed security processes through account aggregation services mean customers develop familiarity with a single authentication process and achieve a greater level of technical fluency with the interface.
3. Real-Time Liquidity Insights For Small Businesses
If you’re a small business owner, knowing exactly how your company’s liquidity is developing on a daily basis is vital to manage resources and inform time-sensitive investment decisions.
While traditional methods of account reconciliation involved a time-consuming and error-prone process, Open Banking in Europe provides a universal option to automatically cross-check thousands of data points across a range of independent accounts.
Small businesses can harness the power of automatic account reconciliation to retrieve real-time statements from multiple banks and create an up-to-date snapshot of their financial status.
4. Seamless Peer-to-Peer Account Transfers
Payment Initiation Services (PIS) facilitate seamless transfers between accounts in a safe and secure manner.
For example, if a business wants to make a cash injection into a certain department or an individual wants to pull money from a current account into a cash ISA, PIS supports fast and pain-free payments through a single interface.
For third-party financial service providers, partnering with an Open Banking platform that’s part of an established banking ecosystem with international reach will reduce barriers to entry when engaging with new customers and boost conversions.
5. Automated Cash Flow Statements
Did you know that 82% of small businesses fail due to poor cash flow management?
Linking multiple business accounts to monitor cash flow in real-time will help companies manage their debts and operate within their financial limits to promote sustainable growth.
If your accounts are scattered across multiple banks, it can be difficult to anticipate cash flow and effectively manage expenditure. Cash flow management is more important than ever in an uncertain economy to give businesses the financial visibility they need to regain stability.
Experience Europe-Wide Connectivity with Klarna Open Banking
Klarna’s established ecosystem of European banking partners gives us both the technical capability and market exposure to support FinTechs and TPPs with sophisticated Open Banking solutions.
We offer powerful tools to help financial innovators develop intuitive multibanking solutions with seamless UI flows. We also offer a white-label service so your business can reap the benefits of conversion optimisation while also maintaining brand consistency with a bespoke ‘on-brand’ front-end.
Klarna believes in PSD2 to break down barriers in finance and improve connectivity between banks, TPPs and end-users. Our job is to simplify Open Banking and connect TPPs with the fastest-growing banking network in Europe with a single API and just a few lines of code.
Learn more or request API Credentials for Playground
Visit Klarna Open Banking to learn more about Open Banking, schedule a demo or request your API keys for our playground environment. Let’s connect and get started.