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October 4, 2019

Open Banking: what you need to know

Open Banking was introduced in January 2018 to enable consumers to securely share banking information with trusted third parties, not just their own banks.

The principle is to give customers more choice and new companies the opportunity to provide better services.

We started trialling Open Banking this year for our Buy-to-Let products to increase speed to offer and reduce the time spent by brokers and their clients on producing documentation. 

Here is an overview of what it is, how it is being used in mortgage applications and what it means for brokers and their clients.

What is Open Banking? 

The official Open Banking website produced this video to explain what it is and how it works:

The short version is that Open Banking allows consumers to securely share their bank and transaction details with third parties so they can produce better services and products tailored around how they use their accounts. 

How do we use Open Banking?

Bank transaction data is a necessary part of the underwriting process for every loan, however this can be time consuming in its collation, transfer and processing. 

 When an applicant consents to Open Banking, we use the access to collect the necessary information from the relevant accounts and transaction history. We can check mortgage history, income, deposit and direct debit account details. 

When permission is granted, we can visualise bank transaction details in a dashboard. 

Open Banking Dashboard

Credit: AccountScore

What does it mean for brokers and their clients? 

How secure is Open Banking?

Open Banking providers are regulated by the Financial Conduct Authority. 

Once a client grants us access, we only keep it for 3 months. Any further uses have to be granted again. 

Transaction information is shared using an application programming interface (API). APIs make it possible for one company’s software to access information from another’s. 

For a company to use a bank API it has to be authorised by the UK regulator as an Account Information Service Provider (AISP). This requires proof of compliance with regulations around keeping account information safe and secure and only using access to provide the service asked for.

Users do not have to share account passwords for us or any other company using Open Banking to have access to the information they want to share, and the company only gets access with their permission. 

Does Open Banking save you time?

Access to transaction history removes the need for physical documentation to be procured, shared with a broker and then shared with us. 

Once Open Banking access is granted, we can use it to check the essential information needed to underwrite applications and only need to get in touch if there is information missing. 

Does Open Banking affect applications?

We only require access to accounts necessary for the application, and we carry out exactly the same process we would if a transaction history was shared on paper or in a more traditional method. 

The only difference is the removal of the burden on brokers and clients to produce the documents.

See our latest Buy-to-Let product guide for details about our £750 legal fee cashback offer, rates from 2.89%, 65% and 70% LTV products and a larger loan size for large HMOs.