Open Banking is something you’re going to hear a lot about this year. Described by many as the future of banking, more than 3 million individuals and businesses have already signed up.
But what exactly is it? How does it work? And what are the implications for property professionals? Below we give you the lowdown and explain why agents everywhere should saddle up and jump on the bandwagon …
Two years ago, the Competition and Markets Authority (CMA) decided that the biggest nine current account banks should no longer own their customers’ financial data. Instead, it would belong to customers themselves; therefore their information could be made available to other companies and institutions.
This decision had massive implications. Suddenly, as long as they had the express consent of the individual concerned, third parties could access a person’s financial details including their income, transactions, spending habits, regular payments, and the credit card companies they used.
This ‘open banking’ concept provided huge opportunities to the individuals concerned as well as financial organisations and service providers. Suddenly a person’s details were plugged into a dynamic ecosystem of applications that could help them with everything from tax and financial management to budgeting and bill payments. Impressive.
Open Banking revolutionises the way people manage their money. Third parties can access their bank statements, analyse their habits, and then suggest better financial products and services. It also saves everyone time by making relevant details accessible 24/7. If you hate chasing stuff, then you’ll love the open concept.
There are so many helpful apps available. Some allow people to view all their current accounts, savings, credit cards, and investments in one place. Others suggest new credit cards or savings accounts based on their spending habits. Open Banking, therefore, ensures that people get the best deal and don’t overpay for things like overdrafts. It also completely transforms how people use comparison websites.
Open Banking also helps businesses too. It saves SMEs time, makes online accounting a synch, helps companies to understand their customers by monitoring their expenditure, and also cracks down on fraud – a big one for the property industry.
A property professional’s pal
Speed is of the essence in the property sector. Therefore, technologies like Open Banking that save time, reduce admin, and increase transparency are extremely welcome. Suddenly a buyer’s ability to afford a house, for example, or a tenant’s ability to afford the rent, can be ascertained in a flash.
Open Banking apps have become a big success in the mortgage sector because they can calculate what customers can afford much quicker than traditional means. Not only does it help agents to identify bona fide buyers; it also helps these buyers to find the very best mortgage for them.
There’s also the potential to revolutionise how payments are handled. Open Banking integrates seamlessly with online banking, increases transparency, and makes it easy to see when payments are scheduled and when they’re overdue. Applications could also automate payments and reconciliation, save time, and reduce human error.
A referencing revelation
Did you know that there are currently 15 million tenants in the UK? That’s a lot of tenant referencing to get through. Thankfully, however, digital referencing can turn tenant checks into a handy, hands-off exercise.
Open Banking allows agents to see applicants’ income and payment records in no time. It reveals their spending habits, if they have any loans, and whether they consistently make other regular payments. It therefore provides a complete overview of an applicant’s financial position.
Agents will enjoy plenty of other advantages too. There’s less chastening chasing to do and the possibility of fraud is hugely reduced. Rental Passports, for example, provide a digital identity record that confirms an applicant’s credit history and suitability.
This cutting-edge technology can also give agents the edge over competitors. Landlords will love the speed, clarity, and reassurance Open Banking provides, whilst tenants will appreciate its efficiency. What’s not to like?
Is Open Banking here to stay?
In a word, yes. It’s only a matter of time before the concept of free-flowing financial data takes the world by storm. More and more companies are embracing the new technology – we’re adding Open Banking to our own digital tenant referencing platform this year – and the advantages are indisputable.
The only potential obstacle, of course, is that it might take people a while to get used to the idea of Open Banking. Others might worry unduly about potential security and GDPR concerns. It’s reassuring to know, therefore, that Open Banking providers comply with all the regulations.
What’s more, it’s important to remember that data is only ever shared with full consent. And no payments can ever be made without express approval. The FCA carefully regulates every single Open Banking service provider.
The bottom line is that the successful property professionals of tomorrow will be those that embrace Open Banking today. So when you’re looking for a tenant referencing provider, make sure you find one that’s on board. Open banking really can open doors for your agency.