Luke Bowmar

Meeting Open Banking with open arms



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You’re sat in your office among a sea of bank statements.

Your client can remember your phone number to ask about the progress of their application, but not their internet banking password and catching them on the phone is always a gamble. Now, the lender calls: “We need another three months of statements from your client.” Surely there’s a simple solution.

Is Open Banking the answer?

Introduced in January, Open Banking provides a set of rules that require banks to allow their customers to share their own transaction data with third parties. The legislation was designed to encourage innovation in banking and allows users to consent to giving access to their data.

There are a number of services making the most of the opportunity in the personal banking world. For example, price comparison websites are now able to provide users with an overview of current account options in great detail. Users are not only presented with possibilities, but are able to understand how the features and perks of a product sit with their business’s financial activity. It’s time to apply this level of convenience to commercial finance.

Open Banking and commercial finance

For many, data sharing is an intimidating prospect, a reluctance to do so has played a large part in the slow uptake of Open Banking services. Education is needed to raise awareness and clearly communicate the benefits of consenting to share information. It’s not up to banks alone, but brokers and lenders, to also educate consumers.

In the near future, I expect we’ll see clients approaching their brokers armed with a range of finance options that they’ve learned about from an Open Banking-enabled service. It’s up to brokers to add value by advising on these options. Intermediaries’ confidence and wider expertise in the financial industry can make all the difference in pursuing that much-needed business loan.

What’s the benefit for brokers?

Imagine accessing your client’s bank statements yourself. No dodgy sharing of login details needed, just consent and current technology. Removing the need to ask for documents means you can forget waiting for a client to return from a holiday or tackling poor computer-literacy skills. The back and forth of a loan application could be significantly reduced as you confidently scroll and click your way to statements that a lender needs to complete their credit assessment.

The commercial finance world is yet to take full advantage of the convenience of Open Banking, but indicators suggest this is changing. Very recently, news that alternative finance providers and major banks are partnering to link their data have emerged. We can expect news of the benefits of these partnerships spreading throughout the industry, encouraging further collaboration in the near future.

Open Banking has suffered from a lack of education and a reluctance from consumers to share data. It’s up to lenders and brokers to work together to keep clients informed in order for them to embrace change. With so many potential benefits, it’s time that we met Open Banking with open arms.

 

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