Expert discusses how Open Banking could be encouraged across the UK
From spending analytics, to personalised loans or credit cards, to instant payments, Open Banking has completely transformed the UK payments and consumer banking industry.
However, Open Banking, for the most part, has failed to take off within the mortgage industry.
So, why is this and what steps need to be taken? Mortgage Introducer reached out to an expert on the subject to find out.
Why has Open Banking failed to take off within the UK mortgage market?
Thomas Chaplin (pictured), head of product EMEA Mortgages at nCino, said when discussing Open Banking in the mortgage sector, brokers hold the key. He noted it is a nearly entirely broker-driven market, with an estimated 80% of all lending going through brokers, while the remaining 20% is direct to lenders.
“So, where Open Banking has worked is where there is a direct to customer relationship, and as a lender you are able to embed the whole consent process within an end to end app or an end to end experience,” he said. This, Chaplin said, is facilitated by allowing the customer to log into their mobile banking app to apply for a different loan or mortgage.
“I think the challenge that no lender has really cracked is how to manage the consent element, because all the vendors who support Open Banking need to get consent from the customer to look at their bank account, and that element does not really work in a broker-driven environment,” he said. Most of the time, he explained, the adviser already has the client’s payslips and documentation, so the incentive is not there to get consent for something already provided.
In terms of how you get around this, Chaplin said, the consent piece would need to be embedded in the broker experience. This could occur, he added, by bringing it in earlier within the journey.
“However, for this to work, brokers either need to use the same vendors or the lender needs to be willing to work with who the vendor has subscribed to,” he said.
There has always been talk about the concept of an Open Banking passport or an affordability passport, and Chaplin said it is that type of expansion where the process can really be brought forward.
What steps need to be taken to encourage the take-off of Open Banking?
In order to further support the take-off of Open Banking, Chaplin said, the technology issue must be addressed.
“So, from a vendor perspective, technology exists to be able to complement the role of Open Banking; however, I do not believe many lenders have the necessary technology to fully implement Open Banking,” he said.
Those who are still on legacy technology will struggle to support the integration, he suggested. As such, the first barrier is improving technology across the wider mortgage market.
“However, that requires the lender to have the technological landscape to be able to support that, and I think for a lot of lenders who are on legacy technology, it is almost cost prohibitive to pursue another integration,” he said.
The second barrier, Chaplin said, is that brokers and vendors must work together to curate the message of encouraging consent among customers.
“How can you incentivise giving consent; the benefit is to the customer and the lender if they use Open Banking to support the decision making process, because the speed at which a loan is accessible is far quicker, and time is money for most,” he said.
How could the further implementation of Open Banking in the UK be encouraged? Let us know in the comment section below.
