Open banking “fundamental” to future of P2P

Open banking will become “an absolute fundamental” for peer-to-peer lenders in the coming years, as credit risk modelling evolves, Clearscore has predicted.

Tim Kelleway, commercial director at Clearscore, told Peer2Peer Finance News that the general principles of the lending market will shift over the next ten years or so. Rather than loan applications being based on credit risk data from direct risk agencies, open banking will play a much bigger part, he said.

“We are helping users understand that if they connect their bank data and put it into the hands of lenders, then lenders can get a broader picture of their own financial footprint and this can potentially lead to better deals,” Kelleway added.

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“Open banking offers a real time version of someone’s finances. It allows lenders to see income shocks and spending shocks, which is increasingly relevant at the moment during the cost of living crisis.”

His comments come after the tech firm won Open Banking Provider of the Year at the recent Peer2Peer Finance Awards.

Kelleway added that adoption of open banking has been relatively slow but fintechs such as Clearscore can help to stimulate the growth.

Last year, Clearscore introduced its own supplementary score which sits alongside the credit score of prospective borrowers. This service is powered by open banking.

“We champion open banking because we think its good for people so that they can get access to better credit,” added Kelleway.

Read more: Open banking deemed crucial to new Consumer Duty