The mortgage sector is ‘disillusioned’ with Open Banking technology – Ian Wilson
Speaking about the different types of technology adoption in the sector, Wilson said some processes had been more effective than others and this was impacting the overall mortgage journey.
He said: “Each technology in my view will be at different stages. For example, APIs you can now argue are moving to enlightenment as we start to see the benefit of things like decisions in principle. AVMs (automated valuation models), you could say are seen as productive as they’re already positively impacting the process.
“Some technologies need to improve to give the seamless mortgage, like Open Banking is probably now firmly in the disillusion box. When these all come together and mature, this is when we’re really likely to move towards a seamless mortgage.”
Wilson referenced the hype curve theory which was developed by American research company Gartner. The theory suggests that technology goes through five phases before it is accepted as a working process by the majority.
These phases include creation, peak, disillusionment, enlightenment and productivity.
Wilson said new technology started with an idea which is seen as a gamechanger and hyped up through presentations, media and initial successes.
“As interest wanes, we enter the disillusionment phase as technology hits some issues or fails. It’s not until the technology matures and companies and users see how it can benefit, that we move into enlightenment and productivity,” he added.
Watch the video below [9:13] hosted by Samantha Partington, contributing editor and freelance journalist at Mortgage Solutions, featuring Ian Wilson, head of Halifax intermediaries.
This advertorial has been produced in association with Mortgage Solutions.
Digilytics AI partners with AccountScore for affordability platform
AccountScore, a subsidiary of Equifax, is a platform which tracks user transactions across multiple banks. Digilytics AI will process the data on its dashboard alongside mortgage affordability checks to produce a real time status of a case.
If any documents or information is missing, the platform will send an alert to the lender to keep it within its service level agreement.
Digilytics AI integrates its services into lender systems and launched with Together Money earlier this year.
Arindom Basu, CEO of Digilytics AI, said: “The checks that are there on affordability are quite rigorous and cumbersome, what we do is there are a lot of processes when identifying and consolidating the data for effective decision making. This data sits across multiple documents and sources.
“We help in finding the data, consolidating it, validating it with relevant information, taking the grunt work out of the equation.”
Hometrack partners with Moneyhub to speed up mortgage application process
Moneyhub’s open banking technology will be integrated into Hometrack’s credit risk hub, which can be linked with lender and broker systems. This will capture mortgage customers’ income and expenditure data in a bid to make the application process faster.
Hometrack is a subsidiary of Zoopla and provides automated valuations to lenders.
Dan Scholey, COO at Moneyhub, said: “Moneyhub has a great track record of enabling innovative clients to build market leading propositions. Hometrack sees the transformative potential of open finance and together we are revolutionising the mortgage application process for income verification and affordability checking.
“This makes the application process quicker and more cost effective, improving customer experience and the operational efficiency of banks, building societies and brokers. It is often said that moving home is one of the most stressful life events. Thanks to open finance, this now no longer needs to be the norm.”
Spencer Wyer, vice president product and solutions at Hometrack, added: “Our new partnership with Moneyhub has been designed to streamline and simplify the flow of time critical information between lenders, brokers and consumers.
“To date, this has been a slow-moving, repetitive process, with consumers often having to submit documents more than once. Integrating open banking technology into our credit risk hub will create a simplified and expedited mortgage journey for all parties.”
Pandemic has driven up use of open banking but awareness remains low – Marketwatch
So, this week Mortgage Solutions is asking: Does the higher scrutiny of borrowers’ financial details during the pandemic make a good case for the increased use of open banking?
Jonathan Clark, mortgage and protection planner at Chadney Bulgin
I’ve heard a lot about open banking over the last few years – usually at seminars and conferences where its possible uses and benefits have been highlighted by technology companies.
However, I’ve yet to have a client even mention it to me and I do not bring it up during meetings.
I wouldn’t consider myself to be a luddite, but I suspect that some younger and more tech-savvy advisers would be more comfortable discussing it with their clients, and therefore be more likely to integrate it into their advice process.
We all know how difficult and time-consuming trawling through a customer’s bank statements can be and open banking should be an obvious solution to this.
I also suspect that if done properly, open banking could enable advisers to evidence affordability more accurately on some of their more complex cases, such as where multiple income sources need to be taken into account, with better customer outcomes resulting.
Another area where I could see it being of use is with self-employed customers whose trading levels have normalised after Covid-19, and a prospective lender needs evidence of this by reviewing their last three to six months of trading income, so maybe I’ll give it a go.
Dominik Lipnicki, director of Your Mortgage Decisions
The case for open banking has always been strong but awareness of it is still quite low.
The pandemic has helped to increase the number of people using it – around 2.5m according to recent figures from the Open Banking website.
As more people shift towards digital platforms in many areas of their lives the number of people using open banking should increase.
We should get behind it because it benefits us all.
It is in all of our interests that lenders are able to more accurately tailor-make financial products to suit individual needs. Of course, the data needs to be secure and we must be in control of what can be shared.
Increasingly it is part of the adviser conversation with clients because it helps people to fully access their information, manage their finances and budgets.
Anything that promotes innovation in products and services is welcome and open banking is doing that in financial services. Awareness is growing slowly so it makes sense for advisers to help spread the information to clients so that they can benefit.
In the long-term the application process will become much quicker, more seamless and more transparent thanks to the technology.
Payam Azadi, partner at Niche Advice Limited
The use of open banking is going in the right direction which is a good thing as it makes life easier for the clients. And from a lender’s perspective it’s better for disclosure.
People should be encouraged to utilise it but I’m not seeing a big take up for it still. I just think that comes down to awareness.
So I think it’s more of an education piece. The banks and providers need to give more guidance around open banking and how it’s used. More consumer awareness will enable it to do well and have a higher take up.
And because it’s to do with banking, a lot of people are more comfortable with the app which is offered by their own banks. They might not be comfortable giving information to other banks and systems.
There are systems that have incorporated open banking within the CRM but that’s still a relatively new concept.
I do not bring it up with clients right now to be honest; we just ask for bank statements as required. But it should be encouraged because it cuts down on administrative work for the broker.
But ultimately, the responsibility is with the client.
It would also solve situations where clients don’t disclose all outgoings or income. For example, some will say they have no children but then you will see child benefit statements in their accounts. Or some won’t even realise that child benefits might count as income which will be considered with affordability.
Open Banking risks treating some mortgage borrowers unfairly, warns ratings agency
The credit rating agency said it had become aware of a new product which promised to improve scores by linking a person’s account to subscription services such as Netflix and Amazon or taking council tax payments into account.
The agency found the free-to-use service claims it will never lower a person’s rating and just requires permission for bank account data to be shared.
DBRS Morningstar suggested that offering an enhanced credit score which is immune to falling would make those who sign up to the service eligible for products they would not otherwise qualify for.
As one aspect of Open Banking is to treat customers fairly by levelling the playing field, DBRS Morningstar said this could put borrowers who do not sign up to certain services at a disadvantage.
If lenders examine the borrower’s artificially enhanced score and find they have typical signs of being a credit risk, such as missed payments or going into their overdraft, the agency said this could lead to the borrower who does not use the service being treated as a greater credit risk.
This will be because the potentially cleaner borrower will still have a lower score than the person whose credit is unable to be negatively impacted, according to the service’s promise.
DBRS Morningstar said the product could affect lenders and said they should be cautious when using credit scores through Open Banking to ensure all borrowers are treated equally and fairly.
The agency’s report, ‘Open Banking may improve credit scoring, but risks treating borrowers unequally’, said: “This could arguably be viewed as no longer providing a level playing field and brings into question the reliability of the credit score.
“DBRS Morningstar believes that in terms of securitisation the potentially enhanced credit scores should be a neutral issue. Performance of the asset, the loan, is more important than the individual credit scores of the borrowers.”
Open Banking for self-employed borrowers will bring quicker applications – Pearson
In fact, close to 10 per cent of digitally active HSBC UK customers are using Open Banking services, with the number growing all the time.
We have been looking at how we can integrate this fantastic technology protocol.
We have seen applications across current accounts and unsecured lending products, where it has made a real difference making life quicker, easier and safer.
And I am extremely excited to now see Open Banking being integrated into our mortgage process in a small but important way that will see the time it takes to go through the underwriting process being much reduced for self-employed applicants.
It will mean they don’t have to go through the hassle of digging out and wading through months’ worth of paperwork which would then need to be submitted either electronically or by post.
After all, as the famous business saying goes “time is money”, and who wants to be doing admin for a mortgage application when you can be running your business, or utilising that time with more fun pursuits?
Let Open Banking take the strain.
We are partnering with Experian on this initiative to speed up the mortgage process for self-employed customers.
The mortgage applicant must be with one of the twenty providers that allow data sharing, a list that, as you would expect in this day and age, includes all the big names and most popular providers.
Why are we doing it?
The simple answer is that it will make a positive difference.
The effects of Covid-19 have been seen far and wide, and literally everyone, self-employed or not, has been affected in some way, shape or form.
Each industry is different and each business within them is different. The landscape for many had changed significantly, so in some cases we needed to ask for a bit more information from self-employed customers to make sure we’re lending appropriately.
This had a knock-on effect whereby in some cases we needed to go back to the broker and ask for more information before completing an assessment. That added time to an application.
When that was done the case would be ready for review and of course with the extra information required, it naturally takes more time for an underwriter make a reasonable assessment of the application. Or it did.
Open Banking provides the customer and broker with a quicker and easier way of supplying business bank statements which eradicates errors and significantly speeds up our ability to assess what those bank statements are telling us.
When you have a scale business, assessing thousands of applications every week, every minute saved in manually wading through additional statements can then be re-invested in getting to the nub of the lending decision and speeding up the lending process overall.
We are very conscious of concerns about the access to information and Open Banking is a very closely regulated process.
But we recognise that customers and brokers alike will have some natural reservations while wider adoption of the technology becomes more the norm.
With the customer’s authorisation we only extract, retain and use the data that is required for this agreed purpose and no other data is held or used by HSBC.
Priority for Open Banking cases
The benefits of using Open Banking this way are easy to see and it is absolutely vital we all embrace this new technology as it clearly signposts the future of self-employed underwriting.
But it also has much wider practical applications to simplify the way we operate.
As an added incentive HSBC will prioritise those self-employed applications that use Open Banking to demonstrate affordability.
We’ll obviously have to wait and see how the take up of Open Banking for self-employed customers goes over the next few months.
However as the technology gains traction with customers and the benefits become plain to see, HSBC will continually assess how to widen its practical development across the business.
LendInvest open banking partnership widens borrower base
The property platform says the use of open banking has allowed it to open up its loans to self-employed and sole trader borrowers, who it previously did not serve.
Credit Kudos uses open banking data to provide lenders with a comprehensive up-to-date view of the current financial situation of an individual or business.
The credit agency uses bank transaction and loan data to produce an insight into the borrower’s circumstances to improve credit decisions.
LendInvest said the time it takes to underwrite an applicant’s financial history has reduced to five minutes since it began using the technology.
Arman Tahmassebi, chief operating officer of LendInvest, said: “Getting rid of the manual documentation process has allowed us to offer a far faster and more convenient service.
“Although we have been using open banking for two years, this new partnership has allowed us to take it to the next level and really reap the benefits of the technology.
“The greater insights are empowering us to make better informed, faster lending decisions to more people.”
HSBC to roll out to whole of broker market this year
Presenting at Mortgage Brain’s Mortgage Vision Masterclass, Paul Norgate, head of north region at HSBC, said: “We have a plan to go whole of market this year. In terms of firms, we’re up to in excess of 320-odd firms now which gives us coverage to a large part of the intermediary market.
“Our plan is to roll that out certainly in the next few months to give us that whole of market proposition.”
Intermediary operations enhanced with Open Banking
Norgate also said the bank had added to its underwriting and business development team so was prepared for a busier market due to the extended stamp duty holiday deadline and the return of 95 per cent loan to value (LTV) mortgages through the government-backed scheme.
He said: “Capacity doesn’t concern us, we’re geared up to deal with it.”
Norgate also said the launch of its Open Banking proposition on 8 March would have a positive impact on case timescales and added: “This is something we should embrace rather than fear or avoid.”
Additionally, HSBC plans to prioritise self-employed clients when relying on Open Banking for mortgage applications, to keep up with changes to criteria and circumstances.
“Potentially we might see change to our self-employed credit policy, as will many lenders – I’m not saying that’s going to happen but if it does, the Open Banking piece will futureproof us.
“So, we won’t have to keep going out and say, ‘now we need this, now we need something different’ because Open Banking will pull all that detail for us,” he added.
Open Banking is key to understanding pandemic’s impact on borrower finances – Westley
Mortgage applications remained high during February with the number of ‘hard’ searches by lenders a similar level to Autumn last year and 12 per cent above the same time in 2020.
Anyone who has purchased a property knows there are still hurdles to negotiate even after you have been accepted for a mortgage, so these buyers will be pleased that they are not faced with a rapidly approaching cliff edge on March 31.
Lenders themselves have been hampered by needing to ask more employees to work from home, people who may have childcare or other family commitments to manage.
But the increased demand in the property market, stimulated by raising the stamp duty threshold, has meant they needed to find a way to keep making high-quality decisions.
All the while, the pandemic has changed the way they can interact with the public. Face-to-face meetings between lenders or brokers with prospective applicants to guide them through the process are not an option. Paperwork is not easy to share.
One of the many consequences of the pandemic is that it has accelerated the mortgage application journey’s digitalisation.
Open Banking is key, providing lenders with trusted bank account transaction data to quickly categorise people’s income and expenditure, so they can judge which mortgages will be affordable for them.
Technology such as Open Banking has also helped them pick through the financial changes of Covid-19, which in many cases are temporary.
For example, someone’s income may be temporarily reduced while on furlough, so a lender needs to understand what their salary is in normal times.
On the other hand, for many prospective homebuyers, expenditure is unusually low because opportunities to spend on food, drink and holidays are – sadly – all too infrequent.
Lenders must ensure a loan is affordable for the product’s lifetime, not just while we’re following government guidelines to stay at home.
Borrowers comfortable online
Digitalisation has undoubtedly brought lenders efficiencies, while customers who would perhaps consider themselves to be ‘digital second’ are now well practised and comfortable in online environments.
The advance of technology combined with the acceleration of confidence in using online services to navigate big moments have provided a couple of positive moments in a challenging year for us all.
As we all hope for a return to normal life in the coming months, the mortgage industry can look back with pride at the progress made to service increased demand when conditions are most challenging.
This work will allow hundreds of thousands of people to celebrate their freedom from lockdown in their new homes.
UK’s biggest lenders plan not-for-profit company to kick-start open banking
The move announced by trade body UK Finance is a bid to comply with a series of requirements imposed by the Competition and Markets Authority (CMA) five years ago, Sky News reported.
Banks including Lloyds, Barclays, NatWest, Santander, Nationwide, HSBC, Danske Bank, Allied Irish Banks and Bank of Ireland, known as the CMA9, were targeted by the order in 2016 following an investigation into the personal current account and SME banking markets.
Using customer data securely, open banking is designed to make it easier for customers to assess their personal banking deals and assess them against rival services by putting all that data on one platform.
The competition watchdog found that the biggest financial services companies were not competing hard enough for consumer business and open banking could be a better option for customers.
The new service company, which will have a slate of independent directors, could pave the way for the open banking model to be extended to a raft of products including consumer credit, insurance, mortgages, pensions and savings.
More to follow.