OVERVIEW
Migdal is revolutionizing the loan experience for its customers by being the first insurance company in Israel to leverage open finance technology. In partnership with startup Open-Finance.ai, this approach allows for a faster, more convenient loan application process. Savings-secured loans use the customer’s Migdal account balance as collateral, allowing the customer to borrow more money at a competitive interest rate. In addition, approved loans are communicated instantly, speeding up fund disbursement.
With the customer’s consent, Open-Finance.ai securely retrieves the person’s financial information directly from their bank accounts. This eliminates the need for manual data entry and saves time from gathering documents like payslips and bank statements. The entire loan application process is digital, and accessible through Migdal’s secure online portal. By leveraging existing account details, Migdal is streamlining loan approvals, getting customers the funds they need faster.
CHALLENGE
Traditional loans were plagued by excessive paperwork, fraud risks, and slow processing times. And customers who wanted a loan faced a lengthy, manual process. Banks held a monopoly on customer financial data and any attempt to access it for better loan options required manual collection of documents and time-consuming consent. This inefficient process was a clear barrier to entry, and it wasted the customer’s time and the bank’s resources.
OPPORTUNITY
Migdal launched an open finance innovative solution that addressed these issues head-on, offering a streamlined process with drastically less paperwork, zero fraud, faster approvals, and near-instantaneous funding. With our open finance innovation, customers can get a savings-backed loan with funds in their bank account within 2 minutes. This offers a clear business opportunity due to the significant improvement in CX.
BUSINESS DIFFERENTIATORS & FUTURE GROWTH
Being the first insurance company in the country to use open finance provides long-term benefits for Migdal Group, such as: 1.) Making customers more loyal by offering better prices and services, which lowers turnover and increases customer lifetime value. 2.) Creating opportunities to sell more products. For example, more information means tailored product suggestions, and opportunities for cross-sell and up-sell—such as offering a customer travel insurance when the data shows that the customer just purchased plane tickets.
TECHNOLOGICAL BACKGROUND
Migdal’s open finance innovation was accomplished via a strong partnership with Open-Finance.ai. Open-Finance.ai securely retrieves customer data directly from their banks using PSD2 Berlin Group protocol. A secure token grants limited and temporary access to the customer’s financial data through the other financial institution’s API, transmitted securely using encryption (HTTPS) and then organized in a human-readable format (JSON). The retrieved data is analyzed using algorithms to assess creditworthiness, and results are sent to Migdal’s system, where automated decision-making processes determine loan approval. Emphasis on security and legal compliance is maintained through encryption, secure gateways, and adherence to financial regulations.
TEAM & RESOURCES
The open finance innovation is a collaboration which combined Migdal’s extensive experience and customer base with Open-Finance.ai’s agile, creative 5-person team. This partnership merged established industry resources with fresh ideas, leading to a solution that integrates financial insight and technical innovation.
SPEARHEADING AN INDUSTRY REVOLUTION
The terrain that’s been forged by Migdal means that customers can skip repetitive logins and say goodbye to tedious manual data entry when other insurance companies eventually look to embrace open finance. Thanks to the heavy lifting and secure technology implemented by Migdal, customers won’t need to re-enter their bank credentials each time they utilize a new institution that also uses Open-Finance.ai.
A CONNECTED ECOSYSTEM
By spearheading open finance for insurance companies in Israel, Migdal established itself as a secure institution for its customers’ financial lives, and built a more interconnected financial ecosystem that benefits the entire country. To be the first insurer to offer this innovation, Migdal had to create the infrastructure for open finance. This involved partnerships with financial institutions and regulatory bodies. Migdal saw an opportunity to create the open finance ecosystem for all Israeli insurance companies by building secure data transfer protocols, APIs, customer consent procedures, and agreements with regulatory bodies and financial institutions. Migdal’s innovation makes it easier for future participants to join the ecosystem, which ultimately benefits the consumer.
PERFORMANCE & METRICS
Growing opt-in rates: We launched open finance on Feb. 20, 2024. Since then, consented data access has grown month-over-month—with 30% of loan customers connecting to Open-Finance.ai by November 2024.
Reduced number of documents by 90%: We’ve reduced the number of documents an applicant needs to upload—from 10, down to 1—and we plan to remove the last document by end of 2024.
Faster approvals: Thanks to a 90% reduction in document collection and verification time, loan closing times have significantly decreased by 80%.
100% accuracy: Manual data entry errors and inaccurate submissions caused by human error have been eliminated for processes using open finance which relies on secure connections to obtain a customer’s information directly.
Zero fraud: Fraudulent applications and falsified documents have been eliminated to zero.
Greater transparency and control: Open finance allows customers to stay informed throughout the process by easily seeing what financial data is being accessed and for what purpose. This transparency fosters trust and empowers customers to make informed decisions.
NEW PAYMENT METHODS & COST SAVINGS
Open finance allows third-party providers to access customer financial data with their consent, enabling innovative payment methods like real-time direct bank-to-bank transfers, streamlined online checkout processes, as well as many other benefits. Currently in the process of being implemented, Migdal anticipates this has the potential to save the company nearly $10M USD in annual credit card fees which will pass on huge cost savings to consumers.
For self-employed individuals, Migdal’s implementation of open finance will streamline the process of contributing to various savings accounts with tax benefits. By securely sharing financial data, self-employed customers will be automatically prompted at year-end so that they can automate contributions, track savings, and access personalized investment advice tailored to their specific financial situation. This can help them build a solid retirement plan and achieve long-term financial goals.
VIDEO
Unlocking Financial Freedom: https://youtu.be/d_7LwGe2Ulw
