Members Only | 11/03/20
Open Banking launched in the UK back in January 2018. No one disputes that the initiative opens up a host of valuable opportunities for those operating in the financial services sector.
However, well over a year since its launch, many lenders are hesitant to exploit the opportunities that Open Banking presents, often due to false or outdated concerns. Here are three of the key Open Banking misconceptions we’ve come across, and the truth behind them.
1. IT’S NOT READY
While Open Banking suffered some teething problems at the outset, all nine banks are now fully up and running.
The consumer environment is slick
and user friendly, with web-to-app and app-to-app redirects and fingerprint/face recognition authentication. Many lenders have already integrated Open Banking data into their decisioning processes. Further, the banks themselves, including Barclays, Natwest, HSBC and Lloyds, have integrated Open Banking within their own applications.
The benefits enjoyed by those who have adopted Open Banking are numerous, and vary from lender to lender. Some are using it to automate and standardise their affordability assessments in the face of increasing FCA pressure on affordability. Others use Open Banking to get comfortable lending to new types of borrowers previously deemed too risky and to improve their risk modelling.
2. THE CONVERSION RATE IS POOR
A common concern is that applicants will drop off when asked to connect their bank accounts. Our experience, however, is that customers are willing to connect their banks accounts for borrowing purposes, with strong conversion rates as high as 70-80%. Applicants feel comfortable with the redirect journey as it is similar to the well-established ‘login with Facebook’ function. Further, for lenders who require applicants to provide copies of payslips or bank statements to verify income, introducing Open Banking can significantly reduce friction in the customer journey and decrease drop-offs.
Lenders can improve conversion by carefully considering where and how they introduce Open Banking in their application journey.
3. IT’S EXPENSIVE TO SET UP
Open Banking integration is relatively straightforward, and typical set up times can be as short as a few days. The time and cost of integration is minimal compared to the time and cost savings generated by automating the underwriting process and improving decisioning.
With the roll out of PSD2 across Europe in September, Open Banking is set to become more widespread and better established. The time to start taking advantage of the opportunities it offers
CEO & Co-founder