There are many reasons why borrowers end up feeling this way when securing a property loan, but chief among them is just how slow it is.
Against this unattractive backdrop, we’ve seen the emergence of Open Banking. This new industry standard is helping to improve the speed of the mortgage process, yet it remains surprisingly underused and underappreciated by brokers and borrowers alike.
How Open Banking can help your clients
It’s now more than a year and a half since the introduction of Open Banking, which allows people to securely share data about how they spend their money with other parties.
Simply put, the benefits of Open Banking are huge for those of us in the mortgage industry. If clients sign up to Open Banking, then we can immediately receive the information we need about their financial behaviour.
No longer will they (or their brokers) have to go through the arduous process of finding relevant information that sometimes stretches back several years, then sending it to us, whether digitally or even in paper form.
Not only that, but the sheer amount of information that Open Banking puts at the disposal of a lender’s team of underwriters allows them to get a much better idea of what the applicant will be like as a borrower.
This isn’t about speed for speed’s own sake, of course. There is no point in a lender rushing towards the decision stage if they then make the wrong decision. But used properly, Open Banking can work alongside a lender’s existing underwriting process, helping them make the right decision on an application much more quickly than is so often the case.
Using technology where it makes sense
At LendInvest, we have been keen proponents of implementing technology in the mortgage process in the areas where it can make a real difference. That doesn’t mean putting lending decisions in the hands of complex algorithms. Rather, to us, it means identifying where technology can take on some of the heavy lifting and support our underwriters in running the rule over an application and coming to a decision.
- B&C roundtable: Bridging market standards, network involvement and attracting quality brokers
- Catalyst Business Finance implements Open Banking
- LendingMetrics revamps website to explain the potential of Open Banking
That’s why we partnered with Onfido to help applicants swiftly verify their identity online by uploading a photo of one identity document, coupled with a selfie on their mobile phone. It’s obviously crucial for a lender to be vigilant in establishing that the borrower really is who they claim to be, but equally there is no reason for that verification process to take days, or even weeks, when existing technology can help a lender do it in a fraction of that time.
It’s a similar story with Open Banking. Our underwriters have seen first-hand how it can help make their job of assessing a borrower’s financial position much more straightforward and swift. The more information we have about a borrower, the more informed we are about what they will be like. This should be a huge selling point to borrowers with an already strong credit record as the extra exposure of their money management will only boost their case.
Why brokers should be big fans of Open Banking
There are some concerns that have put people off Open Banking, most obviously that of security. People are understandably protective of their data and worried that by signing up to Open Banking they could be risking that data falling into the wrong hands.
But, thanks to the safeguards in place, using Open Banking doesn’t mean handing over your account details and passwords — users are only sharing their spending data, not the keys to the vault.
Brokers are the frontline here. They want to deliver the best possible service to their clients, helping them get the mortgage they want in a prompt fashion. As a result, it’s crucial that you ensure your clients understand how signing up for Open Banking can improve the process they go through.
The specialist lending sector is based on building a deep understanding of a borrower’s circumstance and applying underwriting experience to make the right lending decision. You would, therefore, expect this to be a sector leading on the adoption of this technology.
We know that brokers and clients want the most seamless process possible, where you aren’t constantly quizzed and prodded for more information. Open Banking is a tremendous first step towards making that a reality, but it will only work if people embrace it.