Open Banking is a revolution without the fanfare
Bob Hunt is chief executive of Paradigm Mortgage Services
I saw an article headline today that read, ‘Open Banking: The money revolution that nobody knows about’, which to be fair might be pushing the hyperbole a little, but I sort of get the point – certainly, from an adviser perspective, the Open Banking ‘revolution’ has not exactly kicked off with a flash, a bang, or even a wallop.
Whilst the Open Banking fraternity have perhaps not covered themselves in PR glory when it comes to announcing its launch, it’s probably not been helped by the fact five of the nine largest banks who were supposed to be ‘Open Banking’-ready by the 13 January had to ask for more time from the Competition and Markets Authority (CMA) in terms of getting all their data-set ducks in a row.
However frustrating that might seem, it shouldn’t necessarily distract from the milestone of a journey that has been embarked upon, the end results that will be possible, and the significant changes this will mean to all mortgage market stakeholders.
Yet, before we get too excited about what is achievable in the short-term you should also know that Open Banking – essentially giving customers the ability to share their full banking information/data with other businesses/financial organisations – is (initially at least) only going to be available for current account use.
The ability to use Open Banking for mortgages will of course come later – and hopefully not too much later – allowing us to use such information in terms of sourcing appropriate mortgages for clients, dealing with lenders, etc. The fly in the ointment in terms of bank-readiness is a disappointment and we have a little time to wait in that regards, but it’s not a showstopper.
There are clearly major benefits to come for all mortgage market stakeholders from Open Banking. Getting to the bottom of a client’s specific financial details (affordability and credit-worthiness) and history can be a major problem for all advisers taking up plenty of time – especially if the client is not particularly forthcoming for a whole host of reasons.
So being able to access their financial information, to (most probably) use third-party systems to analyse that detail, and to then ‘patch in’ with distributors/packagers/lenders, etc, in order to deliver a much more efficient product choice service, will be a real benefit.
My anticipation – and Paradigm are working with partners who will be able to offer the software in order to make best use of this new, available data – will be that advisers get the client’s agreement, access the data via a specific system, and this will seamlessly integrate into their CRM/sourcing systems, allowing an adviser to be much more confident about where they can place business, where a client fits, plus of course there should be no nasty surprises to follow as the full financial data is there in all its ‘glory’.
Certainty can come at a premium in our market and I suspect seasoned advisers will have lost count of the times when a client’s financials have only been truly revealed once they’ve been fed into a lender and ‘the computer has said no’.
Open Banking should – where the client is willing – cut down on the potential for this type of time-consuming, ultimately fruitless work to go on. It should make advisers more efficient and ultimately this should allow them to deal with more clients far more competently, without going down any blind alleys.
There are of course risks with any new development such as this. I’m thinking specifically of the potential for fraud to be perpetrated, with the fraudsters setting up businesses with the sole purpose of getting hold of clients’ financial data.
As advisers you will need to be wary of this and to set out strong checks and balances for both you and your client to follow, in order that their data doesn’t get into the wrong hands.
However, while we must wait a little while to get there, I’m very confident that the advantages to our market far outweigh any potential negatives.
Despite there being little fanfare, Open Banking should be genuinely revolutionary and it’s our aim at Paradigm to ensure our member firms work with the best tech services in order to get the most out of it for them and their clients.