Fintech VS Bank: Open Finance Enables Business to Apply for Credit in a Blink
News

Fintech VS Bank: Open Finance Enables Business to Apply for Credit in a Blink

February 3, 2022

Credit application in retail banking industry often requires a long process. Compared to fintech, credit applications can be made more promptly. This lengthy process will be unpleasant to go through repeatedly. With more and more financial services available, customers might want to have themselves registered in varied services.

Fintech vs. Bank

Although banks and fintech provide financial services, fintech (financial technology) differs from banks or other financial institution in several ways. The most noticeable difference between fintech and traditional banks is in how they operate. Traditional banks continue to use outdated procedures, bureaucracy, and old infrastructure. Meanwhile, fintech provides agile service innovations.

The term "fintech" is more than just a buzzword. This financial service uses technology to provide customer services, including data analytics, artificial intelligence, and other technological advancements. Many fintech companies understand how to use technology to facilitate various customer needs. They have more user-friendly mobile apps or websites than conventional banks to simplify complex financial processes.

A simple example is when a consumer wants to apply for a loan. Applying for credit at a traditional bank can be lengthy. However, open finance-supported fintech is capable of making it more efficient.

Benefits of the Open Finance scheme in applying for credit

But how does open finance make this process easier? Several aspects can be highlighted for the difference between fintech and banks , including:

- A much simpler procedure

Before we get into open finance, let's talk about fintech and the innovations it provides. They use cutting-edge technology to streamline the loan application process.

The use of applications or websites is a simple example. Borrowers do not need to visit the lender's office; instead, they must register and fill out the application form on the website. The following step can also be completed online. This is unquestionably a more straightforward process than applying for a loan through a bank.

- Easier to do a background check

This is where open finance enters the picture of financial system. Lending platforms supported by third-party open finance APIs can easily verify the debtor's financial information. In fact, this information includes not only their banking transactions but also other relevant financial information such as electricity bills or vehicle installments.

The lending companies no longer need manual checks, allowing them to quickly assess the debtor's ability to repay. Debtor's data in central bank is also secure because open finance respects all parties' consent. This situation does not occur in the traditional financial industry.


- Personalized solutions

The implementation of open finance allows the lending platform to access debtor data. In addition to background checks, this can assist them in providing personalized solutions to customers. For example, prospective borrowers always pay their installments and bills on time; the platform can then offer a longer loan term.

Open Finance in Indonesia

For some time, open finance technology has been a hot topic of discussion in Indonesia, especially given the digital economy's high penetration during the pandemic. According to a Redseer report, online shopping in Indonesia increased rapidly, from 75 million before the pandemic to 85 million during the pandemic.

The good news came in August 2021. Along with celebrating Indonesian Independence Day, Bank Indonesia (BI) introduced the National Open API Payment Standard, or SNAP, which is the standard for implementing open API. The implementation of SNAP is a critical step toward accelerating open banking and implementing open finance in the payment system.

Ayoconnect’s Open API

SNAP BI is a breath of fresh air for the development of Indonesia's open finance ecosystem or banking system ingeneral . The fintech industry can now use open finance technology to improve its services immediately. Ayoconnect's open API is one of them.

Ayoconnect's open API network includes a collection of functions, protocols, and commands that a programmer can use to create a stable and fast interconnection between systems. The use of Ayoconnect's open API enables service providers to collaborate in creating solutions that benefit both businesses and consumers. This includes assisting fintech startups in providing credit services for MSMEs.


Gone are the days when businesses had to go through a long process when applying for a loan at a bank. Thanks to the open finance system, now businesses can do such a thing in a blink of an eye. Easier access to credit means people can develop their businesses quicker, meaning they are one step closer to achieving success!