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Open banking and contractual automation to reduce financial management costs

Open banking and contractual automation to reduce financial management costs

on March 12, 2024

Open Banking is an innovative model for banks and the financial industry. We can define open banking as a digital technology that revolutionised banks and financial services. Its aim is to establish, support, and strengthen clients’ trust. It allows banks to offer more agile financial services to their customers, helping them to make better decisions, and save money.
When Open banking comes with contractual automation, it can reduce financial management costs.

Digital disruption, FinTechs and Regulatory compliance such as the Revised Payment Services Directive (PSD2) have accelerated the competition in the financial sector and forced banks to open and speed up their systems.

APIs are used for sharing financial data in the open banking ecosystem. Using API, banks can now remodel and innovate their core systems.

What is PSD2?

The development of new technologies made it necessary to introduce the European directive 2015/2366, known as PSD2, to regulate the continuous evolution of the use of digital payments, also through mobile devices. 
The UK Government (HM Treasury) introduced the Payment Services Regulations (PSRs) in 2017 that transposed the recast PSD2 into national law on 13 January 2018, as in the EU.
PSD2 has paved the way for open banking, offering customers the right to access their payment accounts and initiate payments via third-party providers (TPPs).

Businesses can offer new products and services, increasing consumer protection and supporting technological innovation and the development of the payments market. The purpose of the PSD2 is to strengthen the protection of payment service users, increase transparency, trust and security, and implement efficiency and innovation in an area which is constantly growing.

Open banking offers businesses significant benefits:

  • Online accounting get easier
  • Loan applications are accelerated
  • Payments and onboarding processes are quicker and more secure.

Open banking and contractual automation can reduce financial management costs when they come together, making processes more systematic. The introduction of PSD2 removes the monopoly banks on financial data, reduces fraud and makes financial data safer as PSD2 requires new security measures, known as SCA (Strong Customer Authentication) on transactions.

The increase in the volume of data and the advent of analytics-based technologies make it possible to extract, collect, process and make usable all the data deriving from the various touch points used by bank customers. 

Banks can set up better and more fluid customer experiences by making data available through an API. They allow an application to have access to the data of financial intermediaries facilitating the exchange of information between different operators: financial intermediaries, technical suppliers, and any other non-financial entities.
But the main benefit of API is the simplification of procedures. Third parties don’t have to verify new customers but rely on KYC procedures already completed by the bank.

With regard to data protection, any processing of personal data for the purposes of the PSD2, shall be carried out in accordance with the GDPR. The APIs also have full support for international transactions, allowing businesses to process global payments quickly and easily-saving time and money. Because of their benefits, APIs are already used in various solutions, and fintech is pioneering their implementation.

How Open banking and contractual automation can reduce financial management costs?

Contract automation is the process of authoring, negotiating, executing, and auditing a contract digitally by using automatic procedures to simplify and expedite contractual processes.

Smart contracts are computer-coded blockchain applications, their terms are executed on a condition-based principle, and are capable of automating transactions between two organisations.
As the first contract negotiation and management platform integrated into the blockchain, Trakti automates templating, negotiation and obligation management processes. Our platform plays as an orchestrator of process and data through diverse systems, including PSD2, while supporting the entire life-cycle of a contract.  By leveraging blockchain and Smart contracts, Trakti can store valuable data on the ledger in a safe and immutable way, and monitoring data allows it to automate reporting.

Trakti Smart contracts can securely handle sensitive data, as they remain in Ethereum blockchain for future usage and are digital time stamped. Trakti offers open APIs to easily integrate our platform with third party services facilitating the sharing of all information and documentation. 

Our platform provides KYC and AML integration to facilitate onboarding and to simplify suppliers and clients check processes. Integrate PSD2 data of contracts for payment monitoring can potentially revolutionise the fintech and non-fintech world in terms of operations speed, cost reduction, fee avoidance, transparency, immutability, intermediaries remotion and security. 

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