Two years later and Open Banking is putting consumers firmly in control of their finances

Two years on from the launch of Open Banking in the UK and we’ve seen a wave of innovation which has transformed the way we all manage, move and make the most of our money.

Experian is behind many of the Open Banking services you see today, processing approximately 1 in 4 of the successful Open Banking API ‘calls’, when people consent to share their bank account transaction data.

After a slow start, we’ve seen a significant increase in people using Open Banking services in the last year. In October 2019, there were 180.6 million data sharing requests compared with the 13.9 million recorded for the same month of the previous year.

New sources of information, such as the transaction data made available through Open Banking, have the power to transform the customer journey and deliver a wider range of affordable and dynamic finance options for people, who are increasingly looking to engage with their money on the go, via any connected device at their disposal.

This consumer contributed data can also play a key role for lenders in helping them to understand borrowers and make more informed decisions through trended data. Armed with the knowledge that a longer view of trended data provides, lenders can identify credit behaviour patterns over time and then make decisions accordingly. It’s an insight which could be useful when onboarding a customer, but equally could help lenders to anticipate people experiencing problems with debt before it becomes unmanageable.

The information required to put trended data into action is already there, it’s about finding the best ways to extract value from it. However, there is also the opportunity to use new data sources such as Open Banking to make for a more detailed understanding of borrowers in the future.

Whether looking at borrowing at a national level or by household, it’s improvements in the way we use data which can lead to higher quality decisions. As well as providing greater choice and convenience to customers, new data can also be particularly helpful for building out the financial records of the ‘credit invisible’ population — people with little or no viable financial information to draw upon — helping them to access both mainstream finance and crucial public services online.

There are an estimated 5.8 million people in the UK who are virtually invisible to the financial system, because there is insufficient information about them to make decisions. These thin-file consumers are generally excluded from large parts of the financial market, reducing their financial options, which in turn increases their cost of borrowing and cost of living.

By adding new and appropriate information sources, such as data from utility companies, along with Open Banking data, we estimate that we can reduce that thin-file population by a further 1.5 million people.

The next natural step is to move forward and help more people to add their own consumer contributed data directly to their credit files and improve their credit scores. This too will enable them to get access to more affordable products and services, by building out financial track records with relevant financial data, whilst helping lenders to understand their customers in a way that is relevant in an evolving, digitalised marketplace.

It’s been a period of exciting technology driven change to the way financial services are delivered. Prompted by regulation and new data sources like Open Banking data, there is a real opportunity to build greater transparency and trust with customers by using their data in a clear and coherent way, reinforced by an obvious and well-communicated benefit to the end-user.