Open Banking Verification Explained

Introduction

How do businesses make sure they’re working with the right people or companies? In today’s world, verification isn’t just important—it’s essential. Without it, businesses risk losing clients or facing costly mistakes.

Verification helps businesses confirm identities, validate account ownership, and ensure consent. Open Banking Verification takes this process further by using secure, real-time data from banks to make it faster and more accurate. It replaces outdated, manual checks with a streamlined approach that’s both reliable and easy to use.

But how does Open Banking Verification work? And why is it becoming a crucial part of business operations? Let’s explore how this process works and why it matters.

At its core, Open Banking Verification confirms three key elements:

1. Identity: Verifying that the individual or business is who they claim to be.
2. Consent: Ensuring that data sharing has been explicitly authorised by the user.
3. Data Accuracy: Cross-checking financial information, such as bank account details, with identity documents for consistency and validity.

How KYC and KYB Work in Open Banking

Open Banking doesn’t just enable data sharing; it enhances how businesses conduct Know Your Customer (KYC) and Know Your Business (KYB) processes. Both KYC and KYB are essential for compliance, fraud prevention, and building trust in financial transactions. Let’s break down how they work in Open Banking and why they are game-changers for businesses.

Step 1: Identity Verification

The first step in both KYC and KYB is identity verification. Open Banking leverages data from identity documents, selfies, and financial records to ensure that individuals or businesses are legitimate.

Here’s how it works:

1. The user uploads a government-issued ID, such as a passport or driving license.
2. The system extracts data like name, date of birth, and address from the ID.
3. The user takes a selfie through the app or platform, which is then matched to the photo on the ID using facial recognition technology.

Example for KYC:
When onboarding a new customer, a Fintech app uses Open Banking to confirm that the person opening an account is the same person as shown in their driving license. The app generates a similarity score to indicate the strength of the match.

Example for KYB:
For a supplier verification process, a business might confirm the identity of the company owner or directors by checking their ID against their registration details.

📚 Income Verification with Open banking

Step 2: Bank Data Matching

Once identity verification is complete, the next step is to match the data with the user’s bank account information. This is where Open Banking truly shines by providing real-time access to financial data through APIs.

Here’s how this step works:

1. The customer authorises the business to access their bank data securely.
2. The system checks that the name on the bank account matches the name on the uploaded ID.
3. A real-time comparison is performed, and the results are included in a verification report.

This step is critical for ensuring that the person or business providing the data is genuinely linked to the bank account in question.

Why is this important?

• It eliminates the risk of fraud by ensuring account ownership.
• It enhances compliance with regulations like PSD2, which requires strong customer authentication.

Step 3: Generating Reports with Similarity Scores

After verifying identity and matching bank data, Open Banking systems generate a comprehensive verification report. This report includes a similarity score, which quantifies how well the data matches across different sources.

For example:

• If the name on the ID matches the bank account name with 98% accuracy, the similarity score reflects this.
• A lower score might indicate potential discrepancies, triggering further investigation.

For KYC:
A high similarity score allows a business to approve a customer quickly, speeding up onboarding processes.

For KYB:
In supply chain management, these reports give businesses confidence that their suppliers are legitimate and financially stable.

Step 4: Ongoing Monitoring for Compliance

Verification doesn’t stop after onboarding. Open Banking allows businesses to perform periodic checks on customers and suppliers to ensure ongoing compliance. For instance:

• If a customer’s details change, the system can flag discrepancies for review.
• If a supplier’s financial health deteriorates, businesses can take proactive steps to mitigate risks.

Ongoing monitoring ensures that businesses remain compliant with regulations and stay protected from fraud over the long term.

📚 Faster Verification with Open banking KYC

Benefits of Open Banking Verification for Businesses

In an increasingly digital world, businesses across industries face challenges in ensuring compliance, mitigating fraud, and providing seamless experiences for their customers. Open Banking Verification offers a practical and efficient solution to these challenges, providing businesses with tools to verify identities and validate data in real time. Let’s explore the key advantages of this technology.

1. Enhanced Accuracy and Fraud Prevention

One of the most significant advantages of Open Banking Verification is its ability to verify identity and account ownership with unmatched accuracy. By using secure APIs to access bank data, businesses can:

• Compare customer-provided details with real-time data from financial institutions.
• Cross-check identity documents with biometric information, such as selfies.
• Flag discrepancies that might indicate fraudulent activity.

For example, a Fintech app onboarding a new customer can immediately detect if the name on the uploaded ID doesn’t match the name on the linked bank account. This reduces the risk of identity fraud and ensures only legitimate users gain access to services.

2. Streamlined Onboarding Processes

Traditional verification methods often involve manual document reviews, back-and-forth communication, and delays that frustrate customers. Open Banking Verification automates and accelerates these processes:

• Identity checks, consent verification, and financial data validation can all be completed within minutes.
• Similarity scores provide businesses with a clear indication of whether a customer’s information is accurate, allowing faster approvals.

This streamlined process benefits businesses by reducing onboarding times and providing a more seamless experience for users.

3. Simplified Compliance with Regulations

Regulatory frameworks such as PSD2, Anti-Money Laundering (AML) laws, and GDPR require businesses to maintain strict verification standards. Open Banking Verification makes compliance simpler by:

• Ensuring customer data is securely handled and only shared with explicit consent.
• Providing a digital audit trail for verification processes, making it easier to demonstrate compliance during audits.
• Automating KYC and KYB processes to meet regulatory requirements without manual intervention.

For instance, a business using Open Banking Verification can demonstrate compliance by providing detailed reports that include customer consent, biometric checks, and data matching results.

4. Cost and Time Efficiency

Manual verification processes not only take time but are also prone to human error, increasing costs for businesses. Open Banking Verification offers:

• Cost Savings: Automated systems reduce the need for dedicated compliance staff and minimise operational overheads.
• Time Savings: With real-time data access and instant validation, businesses can onboard customers or verify suppliers much faster.

For example, a supplier verification process that might traditionally take days can now be completed within hours, allowing businesses to focus on more critical tasks.

5. Better Customer Trust and Experience

Verification processes are often invisible to customers, but their impact is significant. A fast and secure verification process:

• Builds trust by ensuring customers that their data is handled responsibly.
• Improves user experience by removing unnecessary delays and simplifying onboarding.

Customers are more likely to remain loyal to businesses that prioritise security and provide a seamless experience. Open Banking Verification helps businesses achieve both.

Real-World Applications of Open Banking Verification

The advantages of Open Banking Verification extend across multiple industries:

• Financial Services: Banks and Fintech companies use verification to onboard customers quickly while ensuring compliance with strict regulatory requirements.
• Supply Chain Management: Businesses verify suppliers’ legitimacy and financial health using real-time bank data.
• E-Commerce and Lending: Online platforms use Open Banking Verification to confirm customer identities, preventing fraudulent transactions and chargebacks.

For example, an SMB partnering with a new supplier can verify the supplier’s bank details, confirm ownership, and assess financial stability—all in one streamlined process.

What Makes Finexer the Best Choice for Verification?

1. Real-Time Access to Bank Data

Finexer’s Verification API provides direct, real-time access to customer financial data from 99% of UK banks. This allows businesses to:

• Instantly verify identities using official bank records.
• Match names from identity documents with names on bank accounts.
• Conduct secure, consent-driven data checks without delays.

By leveraging this real-time access, businesses can eliminate guesswork and manual errors, ensuring accurate and reliable verification every time.

2. Comprehensive Verification Features

Finexer’s Verification API delivers a full suite of features to handle all aspects of verification:

• Document Verification: Extract key details such as name, address, and date of birth from official IDs like passports or driving licenses.
• Biometric Matching: Compare document photos with user selfies in real-time using advanced facial recognition technology.
• Bank Data Comparison: Confirm the name on the bank account matches the name on the uploaded identity document, with a similarity score to quantify accuracy.
• Audit-Ready Reporting: Generate detailed reports for every verification, ensuring compliance and transparency.

📚 Learn about Open banking Authentication

3. Effortless Compliance with UK Regulations

Navigating regulatory frameworks like PSD2, AML, and GDPR can be complex, but Finexer makes it simple. As an FCA-authorised provider, Finexer ensures your verification processes are secure, auditable, and compliant by design. This allows businesses to:

• Automate compliance checks, reducing administrative burdens.
• Maintain a secure audit trail for every verification.
• Stay protected from regulatory penalties and reputational risks.

4. Advanced Fraud Prevention

Finexer integrates biometric checks, real-time data matching, and similarity scoring to detect and prevent fraud before it occurs. By flagging discrepancies early, businesses can:

• Mitigate risks of identity fraud and unauthorised access.
• Verify account ownership with confidence.
• Protect sensitive customer and business information.

5. Scalability for Growing Businesses

Finexer is built to grow with your business:

• Start Small, Scale Smart: Whether you’re processing 100 transactions or 100,000, Finexer’s infrastructure handles growth effortlessly with 98% uptime.
• Customisable Workflows: Tailor verification processes to meet your unique business needs.
• SMB-Friendly Pricing: Transparent, consumption-based pricing ensures businesses only pay for what they use, making Finexer an ideal solution for startups and SMBs.

6. Proven Partner for UK Businesses

Finexer has already helped countless businesses across the UK achieve their verification goals. Here’s how:

• Quick Customer Onboarding: Reduce onboarding times by up to 3x with instant KYC checks.
• Effortless Supplier Verification: Use KYB workflows to confirm supplier legitimacy, financial health, and regulatory compliance.
• Streamlined Operations: Save time and operational costs with automated, real-time verification processes.

With Finexer, businesses don’t just get a Verification API—they gain a trusted partner committed to helping them thrive.

📚 Download Finexer’s USP for Startups in the UK

Start Your Journey with Finexer Today

Verification isn’t just a regulatory requirement; it’s the foundation of trust, security, and efficiency in financial services. With Finexer’s Verification API, you can:

• Protect your business from fraud.
• Meet UK compliance standards effortlessly.
• Deliver a seamless onboarding experience for your customers and partners.

Ready to get started? Contact Finexer today to schedule a demo and see how our Verification API can transform your business operations.