70pc of lenders will use open banking within two years
One in four (26 per cent) of lenders are currently using open banking but adoption is set to soar over the next two years, new research has found.
According to a survey of lenders by open banking credit reference agency Credit Kudos, 70 per cent of lenders will be using open banking within the next two years.
51 per cent of those lenders who haven’t yet used the technology told Credit Kudos that they planned to do so in the future, and 87 per cent of those said they intended to adopt open banking by 2023.
The research found that the Covid-19 pandemic had changed lender attitudes towards open banking and other new technologies.
Around eight in ten (78 per cent) lenders said that they had to change their lending criteria in response to the pandemic. Almost half (46 per cent) of these lenders changed their policies because it was too difficult to verify borrowers’ income, for reasons including furlough and redundancies.
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34 per cent of lenders that changed lending during the pandemic now recognise the need to adopt new technologies across their business, while 30 per cent saw an increased need for new data sources.
Almost half (47 per cent) of lenders said that they believe open banking could help them save time and cut the cost of credit decisioning.
“From national budget deficits to individuals’ current accounts, the colossal impact of Covid-19 on the nation’s finances was felt by all,” said Freddy Kelly, chief executive of Credit Kudos.
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“In times like these, individuals and businesses look to their financial partners for support, but without up-to-date, accurate information on borrowers’ financial situations, many lenders struggled to continue to lend as they could previously.
“The seismic shock of the pandemic has forced a period of refocusing among lenders on the need for better sources of data, and greater technology integration to help them leverage newer data to enable better decisioning,” Kelly added.
“Open banking technology is helping lenders to move beyond the limitations of traditional credit data and open the door to better financial behavioural data, all of which creates more rounded assessments, increased acceptances and reduced defaults.”
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