With the impact of the COVID-19 crisis on personal finances appearing evermore severe, we look at how Open Banking may be able to help.

The impact of the COVID-19 pandemic on the personal finances of people across the world has been unsurprisingly dire, and this is no different in the UK. More than 4 million people have requested emergency payment freezes, such as mortgage ‘holidays’, and 9 million workers have been asked to go on temporary leave. Data sharing via Open Banking has become essential in providing lenders with accurate, up-to-date information about a customers’ circumstances, enabling them to better assist the financially vulnerable.

The UK was already considered to be leading the way in Open Banking, after the Open Banking Standard was implemented in January 2018. Since the country-wide lockdown was implemented in March, existing trends towards electronic payments - such as contactless payments - have accelerated, and the regulations that govern these transactions have been brought into the spotlight as a result. The pandemic has shown that the future of the financial industry cannot be solely dependent on face-to-face interactions, and instead needs to adopt faster digital methods. Maha El Dimachki, head of payments for the FCA, believes it is unlikely that this acceleration will diminish as we return to normality or that we will return to pre-COVID-19 payment methods. ‘It is also a situation that has seen the importance of a strong, resilient payments infrastructure and landscape working well for the economy in a seamless way’, said El Dimachki.

Open Banking in a pandemic

Open Banking requires financial institutions to share anonymised user data with approved 3rd parties to promote healthy competition and improve the customer experience. This has allowed lenders to help consumers and businesses during the crisis, for example with facilitating the evidencing of revenues for self-employed people. Head of Product at Equifax UK, Robert McKechnie, said that the next few months will see many families suffering from income shocks and falling into arrears. ‘During this period, Open Banking, and its use of up-to-date bank transaction data, will be integral in giving lenders an extremely accurate and detailed picture of a consumer’s finances’, he said. By gaining access to accurate data, service providers can make better lending decisions, particularly regarding affordability, and can identify financially vulnerable people in order to provide assistance where most needed.

LendingMetrics’ own Open Banking product OpenBankVision (OBV) provides this Open Banking data in real-time, allowing lenders to build an incredibly clear picture of a customer’s affordability with fully categorised bank statement data. See what a customer earns and spends, as they earn and spend it, as well as spot any troublesome habits such as repeated use of HCSTC.

Open Banking can also directly benefit banks and credit unions at this uncertain time. Customers must first give consent for access to be granted, and this provides an opportunity to build trust and maintain customer loyalty as a result. The controversial practice of ‘screen-scraping’ is now becoming a thing of the past, as a number of banks block the practice in order to best protect customer data. By adopting Open Banking as a more trusted gateway, this is resulting in more positive relationships with customers. LendingMetrics’ ISO certifications and FCA permissions ensure OBV is secure, aiding in maintaining a customer’s trust that the data they have consented to be shared is in safe hands.

With the question of affordability continually in the spotlight, having access to accurate, up-to-date information is more important now than ever. To find out how OBV can benefit you or your business, contact us today on +44 (0) 2394 211010.