PSD2 & Open Banking for insurance

How to insure you become a leader in the fast-paced world of Open Banking

What is the impact of PSD2 on the financial services industry?

PSD2 has changed the rules of the game in the financial services industry in an innovative way.

The implementation of the Payment Services Directive 2 (PSD2) in 2019 had a huge impact on the financial services market and has especially changed its game logic and rules. Banks have been at the center of the conversation, since they have access to most of their customers’ financial data.

According to Accenture (“The New World of Open Banking”, 2018), by 2020, €61 BN (seven percent) of the total banking revenue pool in Europe will be associated with Open Banking-enabled activities. In addition, according to an Accenture survey of executives from 100 large banks, 65 percent of respondents see Open Banking as more of an opportunity than a threat and 52 percent regard it as a way to differentiate themselves from their traditional competitors.

Therefore, European Banking Institutions appear to be fully aware of the Open Banking potential. They do it by partnering with Fintechs who are basing their value proposition on the capability to read out payment and banking data. For example, as per PWC, 82% of banking incumbents expect to increase fintech partnerships in the next 3 years.

On the other hand, from our experience in the fintech market at finleap, most insurance companies do not seem to be fully aware of their potential in Open Banking. Most of them are still not using the opportunities coming from accessing customer bank statements to their fullest extent. Therefore, we think there is plenty of space to develop innovative solutions in the insurance market, all driven by PSD2 and Open Banking.

So what are the solutions for the insurance market?

finleap connect and its distinctive insurance-specific offering.

Insurers need to increase the touchpoints with their customers and cover all their specific needs faster, all with an enhanced level of detail (“hyper-personalization”).

finleap connect is able to fulfill the insurance market needs with 3 distinctive offerings:

1. Personal Finance Management (PFM) for insurance “Out-of-the-box“
2. API-only for insurance
3. Micro-Insurances

How does one increase customer touchpoints and understand their needs both better and faster?

By using our PFM for insurance “Out-of-the-box” offering.

According to an annual Bain & Company study (“Customer behavior and loyalty in insurance: global edition 2018”), insurers still strive to attract and retain customers. On a worldwide level, most customers only purchase an insurance product in the auto, home, health and life insurance sectors every three to six years. With our offering, insurance companies have the opportunity to solve this issue and increase the touchpoints with customers. We enable them to recommend their own products or best switching options to their own products by recognizing existing customer contracts. Additionally, they can get useful insights about customer behavior, lifestyle habits, and customer personas by understanding customers’ financial behavior and their primary payment partners. In addition, thanks to our capability to categorize transactions using machine learning algorithms, we are able to extract useful insights for insurance companies (for agent-driven consulting activities) or directly make their customers aware of their different needs (for attracting them to new and more insurance products).

What if insurance companies need only the best-quality APIs to work with?

Our offering is quite flexible from this point of view, in fact, our API-only for insurance offering fits the needs of the insurance companies that want to enhance their own services and digitalize their processes. In this case, we can provide stand-alone best-of-breed APIs by using our account aggregation, contract recognition engine and transaction categorization services. When reading out the bank account statements, we aggregate this data, recognize contracts via our contract recognition engine and categorize transactions to enhance cross-selling opportunities.

How can insurance companies keep up with the “hyper-personalization” need required by customers?

We believe that in a “hyper-relevant” world, where every customer requires a high-level of customization, we need to provide tailor-made offers in an easy and fast way. Our Micro-insurances offering can help insurance companies to fulfill their customers’ needs by meeting their specific demands. Do you want to insure against bad weather conditions if there is no snow during your skiing vacation (i.e. bad weather conditions insurance)? Do you want to avoid buying an expensive coffee machine if it is broken after few weeks (i.e. coffee machine insurance)? Our micro-insurance products have a fast go-to-market approach, which means that they can be built in a fast way and aligned with customer needs. All of this would be possible by developing the tailor made micro-products either by using our finleap insurtech portfolio company ELEMENT’s APIs or using the insurance company-specific APIs.

Would you like to collaborate with us or one of our insurtech portfolio companies? Please feel free to reach out to Alex Khoroshko, Business Development Manager at finleap connect: inbound-connect@finleap.com