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.