Lending Works’ chief operating officer has said that open banking presents a huge opportunity for lenders to improve their underwriting and help them meet their affordability requirements.
Jonathan Kramer, who left Zopa to join Lending Works in December following the peer-to-peer lending platform’s acquisition by Intriva Capital, said that open banking benefits the customer experience and can help alleviate many fraud concerns.
Speaking at the LendIt Fintech Europe’s Lending Innovation Summit, Kramer said Lending Works has used the data sharing initiative to reduce friction in its process and improve its customer service by removing the requirement of bank statements or ID.
He said the benefits will move towards underwriting and meeting the City regulator’s affordability requirements.
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“I think it’ll be moving from a customer experience resource for something to be used for underwriting and as we go on that journey the impact for consumers, for challengers and for incumbents,” he said.
“I think the first two are more straightforward for consumers, it’s great and gives them a much more user-friendly type of experience they expect.
“For challengers it’s a great opportunity to have assess to data historically we haven’t had access to so to improve our proposition. For incumbents it’s really interesting, it’s a bit of a mixed bag, I say that because they are going to face greater competition from challengers like us but it’s an opportunity for incumbents.
“For this to work you need to have the right balance between trust, where consumers can trust you to access this data and convincing them it’s worthwhile and demonstrating a better experience.
“I think there’s a huge opportunity as it relates to regulation. In the UK a major focus for the Financial Conduct Authority is around the question of affordability so using these tools to help address an area the regulator is very concerned about is a big opportunity here.”
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Funding Xchange chief executive Katrin Herrling, who was also on the virtual panel, said that open banking can help lenders deliver faster decisions and offer better rates.
She said many were disappointed with the promise of open banking compared to its impact to date, but this is not really justified as firms have been busy building the infrastructure and making it available, which is necessary before implementing exciting uses of the data-sharing initiative.
“Open banking is essentially a nuclear power plant someone put on a green field that is a hugely powerful source of data but as you can imagine with a power plant on a green field you need a huge infrastructure to get to the point where you can slice your toast in the morning,” Herrling said.
“The vision is unlocking the power of the data so you can build and deliver one proposition to transform how funders and businesses work together in a much more collaborative way.
“It’s about instant fast decisions and better rates, it’s an ecosystem moving in that direction, requiring lots of collaboration.”