OPEN Banking could help assuage the regulator’s concerns about short-term lenders’ credit assessments, a peer-to-peer finance executive has claimed.
Amer Bhatti, chief compliance officer of P2P payday lender Welendus, thinks that the new data-sharing initiative could help address the issues outlined in the Financial Conduct Authority’s (FCA’s) ‘Dear CEO’ letter to high-cost short-term credit providers.
The City regulator urged this group of lenders – which includes some P2P firms – to check their creditworthiness assessments, particularly for repeat borrowers, and to assess whether customers are being treated fairly.
It also warned that firms must be able to fund any remediation costs from complaints and should inform the FCA if they are unable to fulfil this obligation.
Bhatti said Open Banking could help by giving lenders access to objective data in relation to customer spending habits and income.
“The pace at which the sector is changing has allowed the status quo to be challenged and has created exciting opportunities leading to better outcomes for consumers,” Bhatti said.
“We are proud at Welendus to have deployed the most advanced technologies which have enabled us to provide a great customer journey and most importantly provide a market-leading product that significantly adds value for the user.”
The Open Banking initiative , which mirrors the EU’s Payment Services Directive II, mandates high street banks to share anonymised customer data with approved third parties.
The FCA’s letter follows the collapse of payday lending giant Wonga in August amid a surge of compensation claims.
“The fallout of Wonga has reinforced the notion that it is vital for a financial services firm to place the consumer at the heart of their business,” Bhatti added.
“Nothing less should be expected as we enter a new age of lending.”
Welendus, which offers investors returns ranging between five and 15 per cent to fund short-term consumer loans, raised £993,104 in an oversubscribed crowdfunding campaign in August.