About
Migdal Group, in partnership with Open Finance, is the first insurance company in Israel to use open banking, accelerating the application process for loans against savings & drastically minimizing document requirements with consented data access.
Innovation presentation
Migdal is revolutionizing the loan experience for its customers by becoming the first insurance company in Israel to leverage open banking technology. In partnership with fintech company Open Finance, 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 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.
Migdal is Forging the Way for the Country’s Open Banking Connections:
Migdal is building an open banking ecosystem for the insurance companies in the country, setting the groundwork for the region. The regulatory framework and technical infrastructure being laid by Migdal are the prerequisites for broader implementation across the country. Here’s a high-level overview of how the technology works:
• Customer Consent and Authentication: Migdal customers give consent for Open Finance to access their financial data, using OAuth 2.0 (secure authorization framework that lets a customer grant access to their data on one site to another site without sharing their password) for secure authentication directly with their banks. This ensures customer credentials are protected, granting Open Finance temporary access through a secure token.
• Open Finance uses tokens: When a customer initially grants permission through Open FInance, it creates a unique token that acts like a secure key. This token replaces a customer’s actual login credentials and provides a secure way for Open Finance to access their data without needing a password.
• Tokens provide limited data access: The tokens don't give Migdal full read-write access to a customer’s bank login or all their financial data. The tokens only provide the specific information the customer authorized (such as view-only access to recurring paycheck deposits to verify income).
• Data Retrieval via APIs: With consent, Open Finance uses the secure token to access the customer's financial data through the other financial institution’s API. For example, with a bank, this data includes account balances and transaction histories, transmitted securely using encryption (HTTPS) and organized in a human-readable format (JSON) for easy understanding and processing.
• Data Processing and Analysis: The retrieved data is analyzed using algorithms to assess creditworthiness quickly and accurately, improving upon traditional methods by considering spending patterns and regular income.
• Loan Decision and Integration: Analysis results are sent to Migdal's system, where automated decision-making processes determine loan approval. Approved loans are communicated instantly, speeding up fund disbursement.
• Security and Compliance: Emphasis on data security and legal compliance is maintained through encryption, secure gateways, and adherence to financial regulations.
This approach revolutionizes the loan experience by making it faster and more user-friendly, harnessing the power of open banking in a secure and efficient manner.
But what does this technical groundwork being laid by Migdal and Open Finance mean as other insurance companies eventually look to embrace open banking? The terrain that’s being forged by Migdal means that customers can skip repetitive logins and say goodbye to tedious manual data entry when using other insurance companies that also work with 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. Here's how it works:
• Connect Once, Use Everywhere: Once a customer connects a bank account to Migdal via Open Finance… Open Finance remembers the connection securely.
• Streamlined Verification: When a customer uses another institution that also uses Open Finance, the system recognizes the customer’s existing connection. This means a smoother verification process with minimal hassle.
• The Customer Remains in Control: Customers will always be prompted to confirm what information they want to share with the new institution, maintaining control over who has access to what.
Migdal is Laying the Groundwork for Future Innovation:
Open banking ignites further innovation, leading to a wider range of personalized financial products and services. Through open banking, Migdal will expand the types of loans being offered, and leverage financial behavioral data to offer customers tailored and personally priced insurance products and additional financial solutions.
• Potential for Future Revenue Streams: With this technology in place, it opens the door for Migdal to explore more innovative ways to monetize open banking in the future and to continue differentiating us from competitors.
• Data-Driven Customer Insights: Access to anonymized and aggregated financial data can empower Migdal to develop innovative new features and personalized financial products for our customers.
Migdal is leading the way in building a secure open banking ecosystem for the insurance industry with robust security measures and transparent user consent procedures, which is a significant innovation not just for Migdal, but for the country–which will benefit other institutions that embrace the technology and ultimately benefit all customers.
Uniqueness of the project
As an Open Banking Pioneer, Migdal is Securing Long-Term Benefits:
Being the first insurance company in the country to use open banking reinforces Migdal’s reputation as a leader in innovation and dedication to improving the overall customer experience. This positive brand image solidifies Migdal’s position in the market with current and future customers. In addition, by being the first, we’re providing increased value to our customers which, in the long-run, results in:
• Stickier Customer Base: By offering open banking functionality, Migdal will become the first insurance institute to be the central hub for customers' financial data. Being able to provide better rates and offerings to customers, this will reduce churn and increase customer lifetime value.
• Cross-Selling Opportunities: Access to a broader view of a customer’s financial health and behaviors allows Migdal to identify opportunities for targeted product recommendations. For example, when a customer buys airline tickets, Migdal will offer travel insurance. Or when someone who is self-employed has money left in his checking account at the end of the year, Migdal will give him an offer to put his money in a pension or provident fund.
Data-Driven Insights Ignite Future Innovations:
Having access to anonymous, aggregated financial data and customer behavior and spending habits provides valuable insights. These customer insights enable Migdal to identify trends and possible voids in our current offerings, positioning us to develop better financial products and tailored services.
Reduced Costs:
Over the long-run, Migdal will benefit from open banking streamlining the loan application process. By allowing customers to connect existing bank accounts for verification, we’re reducing the manual data entry and processing times, and the need for follow-up due to incorrect documents being submitted.
Partnership & Collaboration Over Competition—Migdal has Removed the Hurdles for Future Open Banking Players:
Future open banking players in the insurance vertical will not have to overcome the same hurdles. Migdal’s innovation and success has cleared the path for other companies to simply adopt the existing secure data sharing protocols and regulatory standards for the country. Migdal’s innovative efforts established the country’s open banking standards, making it easier for future participants to join the ecosystem.
Migdal’s Partnership Gives Start-Up Company Open Finance a First-Mover Advantage & Increased Market Share
By partnering with Open Finance, a fellow innovator we've championed through our startup mentorship program, Migdal is helping them establish themselves as the go-to intermediary for open banking data exchange throughout the country, fostering a mutually beneficial ecosystem.
Partnering with Migdal establishes Open Finance as a leader in the emerging Israel open banking space, attracting future clients. A successful Migdal partnership positions Open Finance to become the go-to intermediary for open banking data exchange in Israel.
Lower Rates on Loans & Insurance Policies:
The lower than average interest rate on loans given by Migdal reflects the existence of collateral and the low level of risk of the borrowers, unlike loans given by credit card companies or banks. This allows Migdal to offer attractive interest rates compared to other credit channels. And ultimately, Migdal will be positioned to provide cheaper insurance rates because overtime, we’ll be able to personalize offers based on a customer’s financial behavior.
