Open Banking is a revolution without the fanfare

16 Jan 2018

I saw an article headline today that read, ‘Open Banking: The money revolution that nobody knows about’, which to be fair might be pushing the hyperbole a little, but I sort of get the point – certainly, from an adviser perspective, the Open Banking ‘revolution’ has not exactly kicked off with a flash, a bang, or even a wallop.

Whilst the Open Banking fraternity have perhaps not covered themselves in PR glory when it comes to announcing its launch, it’s probably not been helped by the fact five of the nine largest banks who were supposed to be ‘Open Banking’-ready by the 13 January had to ask for more time from the Competition and Markets Authority (CMA) in terms of getting all their data-set ducks in a row.

However frustrating that might seem, it shouldn’t necessarily distract from the milestone of a journey that has been embarked upon, the end results that will be possible, and the significant changes this will mean to all mortgage market stakeholders.

Yet, before we get too excited about what is achievable in the short-term you should also know that Open Banking – essentially giving customers the ability to share their full banking information/data with other businesses/financial organisations – is (initially at least) only going to be available for current account use.

The ability to use Open Banking for mortgages will of course come later – and hopefully not too much later – allowing us to use such information in terms of sourcing appropriate mortgages for clients, dealing with lenders, etc. The fly in the ointment in terms of bank-readiness is a disappointment and we have a little time to wait in that regards, but it’s not a showstopper.

There are clearly major benefits to come for all mortgage market stakeholders from Open Banking. Getting to the bottom of a client’s specific financial details (affordability and credit-worthiness) and history can be a major problem for all advisers taking up plenty of time – especially if the client is not particularly forthcoming for a whole host of reasons.

So being able to access their financial information, to (most probably) use third-party systems to analyse that detail, and to then ‘patch in’ with distributors/packagers/lenders, etc, in order to deliver a much more efficient product choice service, will be a real benefit.

My anticipation – and Paradigm are working with partners who will be able to offer the software in order to make best use of this new, available data – will be that advisers get the client’s agreement, access the data via a specific system, and this will seamlessly integrate into their CRM/sourcing systems, allowing an adviser to be much more confident about where they can place business, where a client fits, plus of course there should be no nasty surprises to follow as the full financial data is there in all its ‘glory’.

Certainty can come at a premium in our market and I suspect seasoned advisers will have lost count of the times when a client’s financials have only been truly revealed once they’ve been fed into a lender and ‘the computer has said no’.

Open Banking should – where the client is willing – cut down on the potential for this type of time-consuming, ultimately fruitless work to go on. It should make advisers more efficient and ultimately this should allow them to deal with more clients far more competently, without going down any blind alleys.

There are of course risks with any new development such as this. I’m thinking specifically of the potential for fraud to be perpetrated, with the fraudsters setting up businesses with the sole purpose of getting hold of clients’ financial data.

As advisers you will need to be wary of this and to set out strong checks and balances for both you and your client to follow, in order that their data doesn’t get into the wrong hands.

However, while we must wait a little while to get there, I’m very confident that the advantages to our market far outweigh any potential negatives.

Despite there being little fanfare, Open Banking should be genuinely revolutionary and it’s our aim at Paradigm to ensure our member firms work with the best tech services in order to get the most out of it for them and their clients.

Bob Hunt

Blog Archive

Simply focusing on age will not fix borrowing into retirement 
22 Dec 2015

Reduce the regulatory burden for firms by reallocating money from FCA fines 
03 Nov 2015

Customer choice has narrowed – the FCA could help fix this 
02 Nov 2015

The regulator’s differing interpretations of rules 
21 Oct 2015

Change is constant 
08 Oct 2015

Paradigm signs exclusive specialist lending deal with Brightstar 
06 Oct 2015

Landlords cash in on PRS 
22 Sep 2015

MCD – no grace but plenty of favours 
16 Sep 2015

Equity release success signals change in consumer perspective 
05 Aug 2015

Remortgagers play at ‘chicken or egg’ 
29 Jul 2015

BTL has closed the housing gap 
20 Jul 2015

Analysis: Writing a will can avoid a death blow 
15 Jul 2015

Industry deserves housing minister appointed to Cabinet 
22 Jun 2015

Waiving Stamp Duty won't encourage downsizing 
08 Jun 2015

Damned if they do, damned if they don’t 
01 Jun 2015

In the Spotlight with Bob Hunt 
26 May 2015

Election result provides stability 
20 May 2015

‘Grey borrower’ power is set to grow 
13 May 2015

Decisive election result could spur new build revolution 
27 Apr 2015

MMR 12 months on 
13 Apr 2015

Mind the protection gap 
09 Apr 2015

Analysis: Change status with the right support 
08 Apr 2015

Housing will be election battleground 
16 Mar 2015

Securing the specialist string to your bow 
04 Mar 2015

Interest rate direction is anyone’s guess 
04 Mar 2015

Regulatory B2L change is inevitable 
12 Feb 2015

Analysis: Do your homework with relationships 
04 Feb 2015

Lenders rising to the self-employed challenge 
04 Feb 2015

The sectors to watch in 2015 
06 Jan 2015

A helping hand 
05 Jan 2015

Can a landlord be truly ‘accidental’? 
17 Dec 2014

Coming in from the cold 
05 Dec 2014

Analysis: Why distribution demands inclusion 
12 Nov 2014

HSBC’s move signals cost of branch advice still rising 
20 Oct 2014

Analysis: Broker community boosted by HSBC 
15 Oct 2014

Just when I thought I was out 
08 Sep 2014

Analysis: Owning a home is not out of reach 
03 Sep 2014

Take level 4 advice exams before the FCA steps in 
02 Sep 2014

Analysis: Get set for more BoE intervention 
20 Aug 2014

Welcome to the Twilight Zone 
11 Aug 2014

Housing policy deserves seat at top table – Bob Hunt 
24 Jul 2014

MMR is enough to slow the bubble 
09 Jul 2014

Help to Buy remains in the spotlight 
08 Jul 2014

Mixed messages risk consumer confusion - Bob Hunt 
03 Jul 2014

It’s good to talk 
20 Jun 2014

H2B a rare housing policy success 
18 Jun 2014

Increasing mortgage volume will come through brokers - Bob Hunt 
27 May 2014

The better option to going direct 
14 May 2014

FCA concerned by packaging renaissance 
12 May 2014

Watch out for European regulation by year-end 
06 May 2014

Ask the Experts: Will MMR cause mass application declines? 
22 Apr 2014

Ask the Experts: Can a broker operate MMR-compliantly before 26 April? 
17 Apr 2014

Cross-sales not just for times of crisis 
16 Apr 2014

Brokers in the dock 
26 Mar 2014

Lenders in catch 22 situation over MMR - Bob Hunt 
25 Mar 2014

Paradigm launches protection arm 
21 Mar 2014

‘MMR Day’ may be a damp squib 
12 Mar 2014

Make sure your papers are in order 
12 Mar 2014

MMR lending slowdown could force protection bonanza 
18 Feb 2014

Countdown to MMR 
12 Feb 2014

A big year ahead for lenders 
04 Feb 2014

If the quality is same – why can’t AR & DA proc fees be equalised? 
30 Jan 2014

BoE is unlikely to be trigger-happy 
15 Jan 2014

We’re not in 2008 anymore 
09 Jan 2014

FCA cannot ignore views of smaller firms 
13 Dec 2013

The Prediction Game 
06 Dec 2013

Stay ahead of the regulator with CPD 
27 Nov 2013

Don’t let booming business hamper MMR preparation 
21 Nov 2013

Living up to expectations 
15 Nov 2013

MMR compliance underpins success 
30 Oct 2013

Advisers should step up to level 4 qualifications 
24 Oct 2013

Bank of England must follow words with actions 
02 Oct 2013

Lean times leave a leaner, keener core 
04 Sep 2013

If you don't ask lenders, you don't get 
22 Aug 2013

Steady as she goes is the right approach 
20 Aug 2013

Are we about to see a broker boom? 
16 Jul 2013

Now is not the time for procrastination 
10 Jul 2013

Improving standards is no grounds for complaint 
03 Jul 2013

Is product innovation being tied in knots? 
24 Jun 2013

We can’t rely on external stimulus 
06 Jun 2013

Put your services in the shop window 
06 Jun 2013

Mutual Magic 
30 May 2013

Does the FCA understand human frailty? 
07 May 2013

Has the mortgage market regained its mojo? 
17 Apr 2013

Help to Buy plus prudence equals prosperity 
05 Apr 2013

Will George Osborne be having a flutter ahead of the Budget? 
14 Mar 2013

Size matters on capital adequacy 
04 Mar 2013

Mortgage Indemnity Guarantees: helping first-time buyers fly 
19 Feb 2013

HS2? I’d rather see more houses built instead 
06 Feb 2013

95% LTV mortgages are not back... yet 
22 Jan 2013

Regulators have listened to feedback 
21 Jan 2013

The Great House Price Debate 
07 Jan 2013

Keeping your clients' wills up to date 
02 Jan 2013