What is banking aggregation?
In general terms, bank aggregation is a service that allows the automatic collection of account and customer information in the banking sector. This information can then be made available to other institutions under certain conditions of use in order to offer a better service.
It is a method of information management that is part of the current open banking trend. So we ensure that it meets the requirements of transparency and access to information. These technologies comply with certain regulatory parameters and fall within the European regulations of the Revised Payment Services Directive or PSD2.
How does bank aggregation work?
The way banking aggregation works is less complicated than it sounds. Customer information, such as their accounts, transactions, payments and finances, is associated with a single account holder and presented in a single interface. This allows the customer to view all their financial information on a single platform.
This type of service is possible because the user gives access to third parties so that they can use certain information and, in this way, improve their services and business performance. This is achieved thanks to application programming interfaces (APIs), which are software products needed to manage bank accounts and operations.
Here we leave you a more visual scheme so that you can observe the process of data traffic, approval of consent by the user in exchange for a great benefit.
Explanation of bank aggregation
In summary, banking aggregation is a service that seeks to improve the management of and access to customers’ financial information in the banking sector. By allowing access to third parties, it promotes innovation and the development of new financial services. In addition, this service complies with the regulatory requirements established by the European PSD2 regulation.
For the user, the banking aggregation allows customers to consult all their accounts in a single app.
PSD2 and banking aggregation
The so-called Account Information Service (AIS) offers the possibility to lend the information to third parties at your discretion. The owners of the information must give their explicit consent and can withdraw it at any time.
As this generally involves bulk data from a multitude of accounts from which the liquidity, purchasing habits or degree of indebtedness of a certain demographic group can be ascertained, the information is catalogued using the protocols established by the European Union’s revised Payment Services Directive (PSD2).
Banking aggregation softwares
There are many banking aggregation softwares that employ different verification, cataloging and geolocation protocols for data collection. These collect data from banks, accounts, credit cards, personal data and financial services, among many others, within the same organized platform.
There are two types of protocols used to establish banking aggregation: PIS payment aggregators and AIS information aggregators.
Payment aggregators (PIS)
Payment Initiation Services (PIS) are protocols for collecting data from payment transactions that customers perform on a regular basis.
They are present in most payment and transfer services, improving the operational performance of the platforms in terms of billing, receipt and payment methods.
Information aggregators (AIS)
On the other hand, AIS -Account Information Services- collect a wider range of information that allows banking information to be optimized according to other demographic variables.
Both technologies make it possible to study the risk associated with financial services and gain a better understanding of how customers spend their money.
More information about financial risk and bank credit scoring
How banking aggregation benefits the customer
The real benefits of bank aggregation have been questioned on numerous occasions due to the need for user consent. However, nowadays the circulation of information is a common occurrence, especially in the digital sector. We approve that “I accept the Terms and Conditions” without even having opened the document explaining what is the real destination of our data.
In contrast, banking aggregation truly has some clear customer-facing benefits. Here are some of them:
- Access to financial information: With bank aggregation, customers can access all their financial information from different bank accounts in one place, allowing them to have a global view of their financial situation and make more informed decisions.
- Simplification of financial operations: Bank aggregation simplifies the management of different financial operations, such as transfers, payments, credit applications, among others. Customers can perform these operations more easily and quickly from a single platform.
- Time and effort savings: The automation of financial operations thanks to bank aggregation reduces the time and effort customers have to invest in managing their finances, allowing them to spend more time on other important activities in their lives.
- Reduced costs: Financial services provided through bank aggregation are more cost-effective for customers, as bank management costs are reduced.
- Improved security: Bank aggregation implements advanced security measures to protect customers’ financial information, reducing the risk of fraud and information theft.
- Increased transparency: Bank aggregation promotes transparency in the banking sector by allowing customers to access and control their own financial information, which builds trust and loyalty towards banks and financial institutions.
How to benefit from banking aggregation
In the case of companies, the direct benefit of this technology depends on the company’s own activity and strategies.
The applications and systems that incorporate banking aggregation have a multitude of tools and functions that allow data to be analyzed in an orderly fashion and different types of reports to be obtained; financial situation, volume of operations, accounts and invoices, among many others.
- Cost reduction: by automating and simplifying banking operations, costs are reduced in the management and administration of accounts and transactions.
- Increased efficiency: banking aggregation enables banks and financial institutions to provide services more efficiently. As a result, customer satisfaction is increased and the bank’s image is enhanced.
- Customer loyalty: by providing more complete and personalized services, banks can build customer loyalty and reduce churn rates.
- Access to new revenue streams: by offering access licenses to third parties, banks can obtain new revenue streams and increase their profitability.
- Increased security: banking aggregation has security and data protection mechanisms that guarantee the privacy and security of financial information.
In conclusion, bank aggregation is a fundamental tool in today’s financial sector that can significantly improve the customer experience and operational efficiency of banks. By adopting this technology, banks can gain a competitive advantage by providing a more complete and personalized service, while reducing costs and increasing efficiency.
Don’t wait any longer to incorporate bank aggregation into your bank and take your financial services to the next level!