finAPI supports credit checks with open banking solutions
Mandatory creditworthiness checks even for microloans & BNPL
With its new Consumer Credit Directive, the EU has responded to the rise in digital payment methods such as “Buy Now, Pay Later” (BNPL). In order to better protect consumers from over-indebtedness, more comprehensive creditworthiness checks are also required for microloans. finAPI offers innovative solutions for banks, fintechs, and e-commerce merchants to implement these requirements with little effort in the form of the Digital Account Check (DAC) or the KreditCheck.
In November 2023, the Council of the European Union adopted the new Consumer Credit Directive in response to the increasing use of digital payment methods such as “Buy Now, Pay Later” (BNPL). This modern form of instalment purchase and other forms of financing, such as credit cards, have increased significantly in recent years. A study by SCHUFA shows that small loans of less than EUR 1,000 now make up over 40 percent (42.6 percent, as at the end of 2022) of new loans taken out – and the trend is rising. As a result of this development, the EU has decided to also regulate short-term microloans (terms of less than three months and amounts of less than 200 euros), which were previously exempt, in order to better protect consumers from over-indebtedness.
Credit checks also mandatory for microloans
The main aspect of the new regulation is the mandatory extension of the creditworthiness check to microloans. This measure not only serves to protect consumers, but is also intended to minimize the risks for lending companies. Banks, fintechs and e-commerce providers now face the challenge of adapting their processes and contract content to the new requirements, which may entail higher costs and expenses.
This is where open banking solutions such as finAPI’s DAC or KreditCheck can provide useful support for credit checks. The PSD2 directive regulates access to users’ bank accounts – with their consent – via authorized third-party providers (TPPs). The bank account provides an ideal basis for fast and secure identity and credit checks.
Identity checks via the bank account
For identity verification with GiroIdent, the user logs into their online banking via a secure finAPI page and enables access to their account data. The account holder’s name is compared with the data provided in real time. Depending on the application and the level of security required, finAPI offers various GiroIdent products.
- GiroIdent Basis for secure verification of names
- GiroIdent Plus to verify date of birth and address
- GiroIdent Youth Protection for age verification to protect children and young people in the media (KJM-approved age verification system)
- GiroIdent GwG enables the KYC check in accordance with the simplified due diligence obligations pursuant to Section 14 of the German Money Laundering Act (GwG)
- In cooperation with SCHUFA and its myConnect hub, finAPI also enables the complete KYC check in accordance with Section 12 (1) sentence 3 of the German Money Laundering Act (GwG).
Credit checks via the bank account
By logging into the online account, income, and expenditures can be analysed and potential risk factors, such as debt collection entries or direct debit repayments, can be identified. The results of the “Account Check” can be used to assess the applicant’s creditworthiness more quickly and reliably. This means that the requirements of the new Consumer Credit Directive can be met quickly and easily.
The Consumer Credit Directive stipulates that a thorough creditworthiness check must be carried out before a credit agreement is concluded. Various factors must be taken into account, which can also provide information about the consumer’s ability to repay. These include information on the applicant’s income and expenditure.
This is exactly where finAPI kicks in: Banks, fintechs and e-commerce retailers receive a comprehensive analysis of the user’s financial situation through the account view.
Zero-Integration-Solution KreditCheck
With the KreditCheck, finAPI offers a particularly uncomplicated solution for assessing creditworthiness: this zero-integration solution is simply called up via a link and does not require any complicated integration into the bank’s backend systems.
Demo of our KreditCheck
Check out the KreditCheck yourself in our widget demo.
The KreditCheck can also be combined with a SCHUFA report and the finAPI LoanValidator. The unique feature of the LoanValidator is that it can compare the loans found in the account transactions with loans reported to SCHUFA. If there are more loans listed with SCHUFA than are recognizable on the specified account, banks can ask customers to include additional accounts in the process. This provides you with an up-to-date financial overview of all accounts in no time at all – even from third-party banks.
Efficient creditworthiness checks with finAPI
finAPI’s solutions enable efficient implementation of credit scoring. Thanks to the user-friendly and digital credit check, they are suitable for all types of credit. Open banking solutions are currently particularly attractive for microloans, short-term loans and interest-free loans that fall under the new EU Consumer Credit Directive, as they can be quickly and easily integrated into existing processes.
The directive came into force at the end of 2023 and the member states now have two years to transpose the requirements into national law and three years to ensure their application. More information: Click here for the adopted Consumer Credit Directive.
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