Thomas Chaplin, head of mortgage product, EMEA at Ncino, said Open Banking worked well in a direct to consumer environment, as the in-app process simply asked users to give lenders consent to access their accounts.
“If I was to do a mortgage on a mobile app, whether it’s a rate switch or remortgage, as long as that consent experience is embedded within that application journey – which is where you see Open Banking doing really well today – then that’s really easily managed,” he said.
Chaplin said the challenge was different when it came to mortgages sold through a broker, as the adviser will capture the information needed and then a notification would need to be sent to the client to give consent to having their data shared.
“With all the phishing and fraud, clients like to be really careful. So, no one’s really solved what the role of Open Banking is within the broker context,” he added.
“That’s not to say it can’t be solved, you just need to embed that experience earlier on within the broker process.
He said another barrier to the use of Open Banking was lender investment, as it was very costly to implement the technology particularly where legacy platforms were in use instead of cloud systems.
“If a lender embarks on the journey of Open Banking, it could just be 10 per cent of their customers who benefit. It might be better to improve speed of decision by putting the money somewhere else,” he added.
Chaplin said lenders should at least test the effectiveness of the technology.
He said it was not a priority to lenders, but Ncino could help them to integrate to a third-party platform and have an “embedded Open Banking experience” where a dashboard is produced for the underwriter.
He said the problem also arose when there was a conflict between the Open Banking system a broker might use and the one approved by a lender.
Chaplin said the only ways to remedy this would be for a lender to increase the number of customers they wanted to sell to directly, or to heavily invest in capturing this data early on in the intermediary process.
He added: “From our experience, the majority of brokers already have the client’s payslips, so there’s no point in getting consent to scan their bank accounts.”
Chaplin said lenders did not need to do this through all brokers as they could partner with select firms and networks to make a “mutually beneficial business case”. He said some firms were already giving certain lenders a significant volume of business, adding: “There are operational efficiencies to be gained where brokers don’t need to look for payslips and the lender gets the benefit of speed of decisioning.”
Open Banking ‘just one answer’
He said Open Banking was just one answer to the problem of verifying income and expenditure, adding that artificial intelligence or optical character recognition (OCR) could also be used to scan a document and verify transactions.
Chaplin said tools to verify income and expenditure could cause a change in policy and simplify the process for certain borrowers, saying that for those who “are very low risk, do you really need to see three payslips when you could just see one”.
He said even further down the line, this could potentially lead to pre-approved mortgages with the backing of detailed client transaction and credit information.
He said Open Banking could also help with those with more complex incomes as that could be harder to work out. Chaplin said around half of the payslips submitted to lenders were not provided correctly the first time around.
“That’s doubling the amount of effort and time it takes for a customer to get a decision,” he added.
Chapline continued: “If you can get an instant answer to someone’s annual income, that forgoes the need for payslips and bank statements and the like. It also opens up the opportunity for instant decisioning.”
Chaplin said the messaging around Open Banking also needed to change to encourage users to adopt it and give them the confidence to provide consent to lenders.
He said this could require a “degree of collaboration” with a broker during the mortgage process by telling a client that they had the option of clicking a link when prompted.
Chaplin said customer confidence could be improved by publicising the use of Open Banking and its benefits in other parts of the banking sector. He highlighted that this could be done by showing how a product’s journey was made smoother with its use.
“They need to understand what the trade-off is,” he added.
Chaplin said not all people would want to reveal the entirety of their accounts, so there needed to be transparency around why it was being used.
Agreement with OSB
Chaplin has worked for Ncino for three years and has worked in financial services for around 15 years.
The company provides cloud software as a service, and supports lender origination and credit decision systems. Its clients span the commercial and residential lending markets.
Ncino recently partnered with OSB to provide a cloud-based platform to the lender with an aim of streamlining its banking processes including underwriting and loan origination.
The firm said the partnership would “create agility” in OSB’s lending practices and allow it to react to market changes with speed.
Matthew Baillie, group chief transformation officer at OSB, said: “Our goal is to be recognised as the UK’s number one choice of specialist bank through our commitment to exceptional service, strong relationships and competitive propositions, helping customers, colleagues and communities prosper.
“I’m looking forward to the journey ahead of us with Ncino and the added flexibility and agility we will gain by implementing the platform.”