Open banking – nothing but a busted flush
Mark Dryden is business development director at 360Dotnet
Open Banking, the sleeping revolution that permissively opens up personal bank account data and allows organisations to extract that data, is rightly attracting a lot of attention in the mortgage sector.
An individual’s recent spending provides insights into both liability and affordability. Having the opportunity to extract this data from the source, with the individual’s consent, ensures the figures are trustworthy and valid at the very start of the advice process.
The potential Valhalla is that not only is the broker collecting this data at the outset, where any issues can be highlighted early, but in its electronic form it can automatically fill budget planners and pass this data onto lenders with a trust hash to confirm the original data has not been changed. Gone are the days of requesting bank statements or even having to print off and physically sign PDF copies to guarantee authenticity.
Now a client can access a broker’s secure portal and/or online client fact find then provide consent and a time frame for the data extract, all within minutes and with very limited keying of data. By inserting this rich data set into the advice process there’s opportunity for a slew of other services such as automated protection tools that calculates indicative quotes based upon spending habits or offering ancillary services like personal financial management tools.
Where things become unstuck is that it’s possible to mask less desirable spending away from an individual’s current account – spending that may impact an application or provide a conflicting perspective of an individual’s credit score.
Today, escrow services (PayPal) and digital wallets (Apple Pay, BitCoin) provide a convenient way to make payments for a wide variety of services and products that doesn’t state what the spending related to. This isn’t a new phenomenon and for those of us with established “secret families” or other disagreeable spending habits, multiple current accounts and farcical antics will continue to be the norm.
Where the effectiveness of Open Banking will be diminished is by a fundamental lack of trust to share bank account data with a third party where there’s macro trend of people fundamentally having no confidence in the processing our data in the first place – regardless of who it is shared with.
Current accounts are a necessary evil and as different industries look towards the advantages of Open Banking, would the likes of the recent Cambridge Analytica and Facebook scandal change individual behaviour to mask or obfuscate their spending to provide more favourable or beneficial outcomes when sharing their data.
People like their secrets, they treasure their individuality and they expect their data to be processed in a fair and straight manner; any deviation from this will change the perception of data sharing almost irreparably and the massive benefits downstream in the mortgage advice process for clients, brokers and lenders alike.