How to build a good Open Banking journey in the context of lending?

Leveraging open banking offers an opportunity to improve user experience, increase efficiency, and ultimately drive higher conversion rates. However, users may hesitate to engage with open banking due to psychological barriers such as mistrust, and fear of complexity. Addressing these challenges requires a journey that not only demonstrates clear value but also reassures users and reduces friction at every step.

From a lender's perspective, the hallmark of a good open banking journey is a high conversion rate. This metric reflects how effectively the journey convinces users to share their data and proceed with their credit application. Achieving this requires a careful blend of user education, seamless experience design, and fallback mechanisms to handle rare but potential unavailability issues.

In this article, I present the critical elements to craft a high-converting open banking journey:

1. Offer compelling and proven benefits

To overcome initial hesitation, users need to see tangible advantages that make open banking worth using. Perceived benefits are the primary motivator for users to engage with the process, and emphasizing these advantages can make or break the journey’s success. Two identical journeys will yield significantly different results if one offers strong, tangible benefits, while the other fails to provide a clear value proposition. Establishing this value upfront is essential to success.

Examples of such benefits in this context may include:

• Tailored interest rates: Encourage users to opt for open banking by offering better rates or personalized loan terms, enabled by more accurate financial assessments.
• Immediate responses: Emphasize the speed of decisions enabled by instant access to financial data. Compare this to traditional processes that often involve waiting periods.
• Simplified processes: Showcase how open banking eliminates the hassle of gathering and submitting paperwork, reducing effort and making the application journey smoother for users.

A journey that effectively communicates these benefits will consistently outperform one that does not. Users must clearly understand what they stand to gain, as this perception of value directly correlates to their willingness to proceed.

2. Seamless user experience (UX)

Psychological barriers such as mistrust, and fear of complexity are best addressed through a carefully designed user experience. A good open banking journey minimizes friction and provides reassurance, even for those unfamiliar with the concept of open banking. Here’s how:

• Explain what open banking is: Many users applying for credit online may not know what open banking entails. Provide a concise explanation during the journey to reassure them. Use accessible language to describe how it works, the benefits, and the robust security measures in place to protect their data. For example, include simple visuals or analogies to clarify the concept without overwhelming users.
• Avoid overloading users with details: While some users will need reassurance, others may prefer to proceed without additional information. Design the experience to cater to both by making educational content optional—easily accessible but not intrusive. For instance, include “Learn More” links for users who want deeper insights.
• Eliminate unnecessary friction: Avoid creating unnecessary steps in the journey. For instance, streamline the process of granting consent, ensuring users can quickly and confidently move forward without confusion or delays.
• Offer accessible support options: Some users may still feel uncertain during the journey. Providing easily accessible support, such as a live chat, a hotline, or a comprehensive FAQ section, can help guide them through the process and reduce drop-off rates.
• Manage waiting times effectively: In lending, decision-making can take a few seconds to process. Set clear expectations by informing users in advance, using loaders, and displaying clear messages to prevent frustration and premature drop-off.

By addressing these psychological barriers directly, lenders can make users feel more comfortable and in control, paving the way for higher engagement.

3. Handle error cases gracefully

Although increasingly rare, issues like unavailable bank APIs or connectivity issues can still occur. A good journey anticipates these scenarios and incorporates effective fallback mechanisms to retain users:

• Alternative options: If a user’s bank cannot be reached through open banking, provide them with an alternative way to continue their application. For example, allow users to upload traditional documents or manually input data as a fallback. Although this is rare nowadays due to the improved performance and ongoing enhancements of bank APIs, it is still important to manage this case.
• Transparent communication: Keep users informed if something goes wrong. Use clear, reassuring messages to explain the issue and guide them through the next steps.
• Forward-looking design: While error handling is vital today, its importance will diminish as banks become more robust in complying with PSD2 API standards. However, retaining flexibility ensures the journey remains resilient against any unforeseen issues.

Building for the future

As open banking becomes more entrenched in the ecosystem, user expectations will evolve. A good open banking journey should not only address current needs but also anticipate future trends and advancements. Here’s how:

1. Personalization at scale: Use the rich financial data available through open banking to create hyper-personalized credit offers that resonate with users.
2. Continuous optimization: Leverage analytics and user feedback to refine the journey over time, identifying and addressing bottlenecks to maintain high conversion rates.

Conclusion

Crafting a good open banking journey in the context of lending requires a focus on delivering value, creating seamless experiences, and addressing potential roadblocks. By clearly communicating the benefits, designing for both informed and uninformed users, and incorporating robust error-handling mechanisms, lenders can drive higher conversion rates and build trust with their users.

As the ecosystem matures, staying ahead will require continuous iteration and an unwavering commitment to user-centric design. By embracing these principles and maintaining trust as a cornerstone, lenders can unlock the full potential of open banking and deliver journeys that set them apart in an increasingly competitive landscape.

Groover Anderson, Product Manager at Algoan