Open Banking yet to provide ‘seismic shift’
OPEN Banking hasn’t been as ‘seismic’ as initially predicted as it approaches its two-year anniversary, Equifax claims.
Open Banking was launched in January 2018 to great fanfare, mandating the UK’s largest banks to share anonymised customer data with approved third parties, with the aim of increasing competition and innovation in financial services.
Read more: Zopa launches income verification tool using Open Banking data
Robert McKechnie, Open Banking expert at credit reference agency and analyst Equifax UK, said its potential remains untapped.
“Open Banking platforms have the capacity to address unmet needs of SMEs, provide better outcomes for those in problem debt, and be at the forefront of the fight against financial fraud in 2020,” he said.
“Two of the main pain points for start-ups and would-be entrepreneurs are access to credit and inflexible payment plans.
“Open Banking solutions now exist that can overcome these obstacles, supporting businesses with thin files by, for example, drawing upon personal finance history.
“Further development of such platforms will help align the needs of the vital SME sector with providers of finance, and allow firms to amplify their understanding of spending patterns and periodic stress-points.”
He said Open Banking has many uses such as mitigating the risk of financial fraud, fully digitising and streamlining credit applications and the consent and verification processes within the mortgage, insurance, automotive and utilities space.
“Open Banking platforms can also help providers assist and recognise consumers who are showing unusual spending patterns,” McKechnie added.
“For example, early intervention is possible when an existing customer exhibits signs of financial stress, such as regular use of an agreed overdraft facility or their bank account going into excess territory, which leads to better debt outcomes for financially vulnerable consumers.
“While the impact of Open Banking hasn’t been as immediate or as seismic as initially predicted, it has irrevocably shifted the banking and wider financial services landscape for the better, and must continue to develop and broaden in 2020.”
Read more: Open Banking could provide £1bn boost for UK economy
