Why brokers should embrace Open Banking
Faced with overcoming the frustrations commonly experienced by brokers and their clients when getting a mortgage, we’re continually developing and adopting new technologies as a way to support our underwriters in helping make applications quicker and less painful for the applicants. One such technological advance we’ve adopted is Open Banking.Lenders like us, that are welcoming the principles of Open Banking into our work, can see first-hand the huge impact it can have, such as:
- Reducing the time burden on brokers and their clients to produce relevant documentation
- Making underwriting easier and better informed
- How secure it is.
Our sales director, Ian Boden, explained in more detail the potential Open Banking has for the mortgage business:There are many reasons why borrowers end up feeling unsatisfied way when securing a property loan, but chief among them is just how slow it is. It is against this unattractive backdrop that we’ve seen the emergence of Open Banking. Despite the potential of this new industry standard to improve the speed of the mortgage process, it remains surprisingly underused and underappreciated by brokers and borrowers alike. How Open Banking helps your clients It is now more than 18 months since the introduction of Open Banking, which allows people to securely share data about their spending with other parties. The benefits of Open Banking are huge for those of us in the mortgage industry. If clients sign up, then we can immediately receive the information we need about their financial behaviour. No longer will they (or their brokers) have to find 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 to then make the wrong decision. 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. Read more: Open Banking: what you need to know Technology where it makes sense When we talk about using technology to make a difference, we don’t mean putting lending decisions in the hands of complex algorithms. We mean identifying where technology can take on some of the heavy lifting and support our underwriters in considering an application and coming to a decision. 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. Lenders must be vigilant in establishing that the borrower 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 witnessed 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 notably 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. This is why brokers are so important to this. They want to deliver the best possible service to their clients, helping them get the mortgage they want in a prompt fashion. Therefore it’s crucial that you ensure your clients understand how signing up for Open Banking can improve the process they go through. Technology’s importance to specialist lending 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. A version of this piece was originally published in Bridging & Commercial.