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Pioneering mutuals early adopters of Open Banking

Originally published in Society Matters magazine

Since Open Banking launched in 2018 giving consumers control over their own data, there has been a mountain to climb in terms of the technical implementation to make it a reality. However, building societies and credit unions have been some of the early pioneers using Open Banking in the market.

Consumer research in 2017 on attitudes to Open Banking has posed a challenge, with it highlighting reluctance on the part of consumers to share their data with third party firms.

Despite this, the latest data from the Open Banking Implementation Entity (OBIE) shows good progress taking place. There have been more than 180 million successful API calls for customer account information using Open Banking over the last two years.

And new Open Banking fintech propositions like Yolt, Chip, Emma, Plum, and banks’ own services, have started to highlight the possibilities it can open up for managing money or saving cash.

The other big use case for Open Banking is around assessing affordability for lending and Skipton Building Society and No.1 CopperPot Credit Union have been some of the first firms to use it for this purpose.

Consenting to Open Banking 

Skipton is currently piloting the use of Open Banking with its direct mortgage customers. Instead of the customers manually providing bank statements as part of the mortgage affordability process, its customers have the choice of using Open Banking.

“The response to date is that a surprisingly high proportion of customers are willing to consent to Open Banking, and it is improving the time to offer for those who do,” says Karen Appleton, Head of New Lending Operations at Skipton. “Ideally this would include the verification of income from a payslip perspective and we are working on this future possibility too.”

She add that while it's too early to say what the long term impact of Open Banking will be on the wider mortgage industry, Skipton is committed to being at the forefront of offering customers choice, ease of access and digital tools.

Speeding up the member journey

No.1 CopperPot has been actively piloting a variety of technologies over the course of 2019, such as chatbots on its website to deal with member queries.

In August this year, it also started to use Open Banking provider Credit Kudos’ Atlas system to assess members’ banking activity as part of its loan process.

“Open banking allows us to use the members banking activity to identify their income and their fixed or flexible expenditure, verify their budget, and establish affordability for the loan repayment,” says Elise Ney, Lending Manager at No.1 CopperPot.  “The response from the members has been positive so far as it can speed up the member journey and means that they do not need to complete budget planners.”

Ney adds that since it started the pilot in August, 35% of applications have been processed using Open Banking over the period.

Will 2020 be the year Open Banking takes off?

Technological change has always taken a long while to be absorbed.

In the 150 years since the BSA launched, mutuals have gone from pen and paper, mechanised counting machines to early-computerised systems. Cloud based services, application programmable interfaces and Open Banking are just recent iterations of this continual process of technological innovation.

Given the efficiencies that Open Banking can provide and customer sentiment warming to securely sharing their data, the early signs are that it could have a big impact on a wide range of products and services building societies and credit unions provide.

Posted by Robert Thickett on 11 December 2019