Credit Management September 2019

The UK’s Open
Banking initiative
was created with
the twin desires
to give consumers
more control of their
data, and encourage
competition
and innovation in
finance
adoption trends so far, and future plans.
First, however, it’s important to set out
the expectations, on both the business
and consumer side, to show where wider
benefits and indeed challenges may lie
but also illuminate where the industry
can play a part.
THE BENEFITS
According to our research, a nearunanimous
99 percent of financial
services organisations polled expect
Open Banking to benefit their business.
The main benefits expected were faster
application or onboarding processes
(52 percent) and improved customer
experience (46 percent). In today’s
competitive landscape, it’s unsurprising
that customer experience is recognised as
a top priority, and Open Banking is a key
platform for delivering a smoother and
faster customer journey.
Over half of the financial firms
surveyed said they struggle in processing
consumer applications. Key pain points
include the costs and time associated with
manual processing of data (56 percent)
and customers taking too long to gather
relevant documents (50 percent) – both of
which Open Banking can address.
In fact, customer experience is cited
as the key reason for financial firms
to implement Open Banking, with 56
percent stating their organisations need
to improve customer experience during
applications. This is closely followed by
both product innovation and keeping
up with the competitive landscape (53
percent).
So businesses are promising
consumers a better application experience
and customer journey, but what about the
consumers themselves? Our study found
that the top consumer expectations, if they
consent to give access to their financial
data, are for faster application approval
times, an easier application process for
financial products and quicker ways to
provide proof to back up an application.
Each of these three elements should
ring bells in the credit management world
as key areas of focus. With clear, consentdriven
data available, credit decisionmaking
within a smooth and customerfriendly
application process could be
revolutionised. In fact, 56 percent of
consumers say that when it comes to
financial products, they would prefer a
completely online journey with an instant
decision.
Another key desire from consumers
is for access to products tailored to their
circumstance and better support if they
had limited credit history when applying
for loans or credit. Another opportunity
for credit professionals to advise clients at
an individual, data-driven level.
BARRIERS TO ADOPTION
The challenge comes in the divergence of
what it will take to deliver these benefits.
The research shows that consumers
recognise the value their information has
but concerns about security hold them
back. The research showed the biggest
barriers to consumers sharing their bank
statements with financial services firms
through Open Banking are the fear of data
being shared or sold to other companies
(86 percent) and fear of data breaches (82
percent).
While the businesses surveyed also
recognised this; with around two-thirds
believing that fear of data breaches
(68 percent), and the potential for data
being sold (59 percent) by organisations
is holding consumers back, they clearly
underestimate the extent of the consumer
concern.
The lesson is clear – investment
is needed in creating and delivering
the correct policies, procedures and
positioning to help build consumer
trust in the new system. And this is why
September heralds an important date, as
that crucial security element comes into
force.
WHAT LIES AHEAD
Prediction is difficult when we consider
a world of unprecedented technological
shift, but with Open Banking we can
see the early shoots of progress in new
services. There is a real need for credit
managers to get involved, but the big
opportunities are yet to be tapped.
For instance, many in the property
sector intend to utilise Open Banking.
We have been involved in early projects
in this industry to use Open Banking
processes for tenant vetting – looking at
income and expenditure data, employer
information and rent recognition. These
pieces of information can be invisible to
traditional methods of credit assessment,
and their availability can potentially
revolutionise the rental sector for both
landlord and tenant, as well as opening
the door for more first-time buyers to get
on the property ladder.
We’ve recently seen one of these
projects come to fruition in the case
of tenant referencing, through our
partnership with Let Alliance, which
has developed a process that allows
consumers to give Let Alliance, when
acting for processional letting agents
and their potential landlords, access to
their full credit file. Our Open Banking
technology which is built into this process
provides a detailed understanding of
the potential tenant’s financial status –
spanning income verification, risk and
affordability – helping letting agents to
make an informed assessment while
also delivering an improved customer
experience and, most importantly,
helping consumers to secure the rental
property they want through a quick and
easy process.
With consumers and financial
institutions crying out for swift, smooth
and secure customer journeys and
application decisions, Open Banking
represents a massive opportunity across
a host of different business sectors,
helping to ensure choice and protection
for consumers whilst putting the power of
the data firmly in their hands.
Will North is Core Credit Director
at TransUnion.
The Recognised Standard / www.cicm.com / September 2019 / PAGE 55