There’s no doubting that discussions around ‘fintech’ and what it might open up for the financial services market are incredibly prevalent at the moment, with – in the mortgage market at least – many suggestions of a revolution in the way advisers can access the financial data of clients, be confident in its veracity and, following this, how lenders can utilise that data in order to speed up the whole underwriting/application process.
When you write it out like this, it seems simple and straightforward, and clearly part of the major issue advisers often have is getting to the truth, the whole truth, and nothing but the truth when it comes to a client’s financial situation. How many times have you gone through the factfind process with a client to find out later that there were some rather relevant missing facts when it came to their incomings and outgoings? Clients often feel that they have a better chance of securing a loan if they leave out some of that information, only to be caught out at some point down the line.
So, having a clear 360-degree view of a client’s finances would of course be beneficial and would most likely cut down on the to-ing and fro-ing that comes with many client interactions. This is why many have heralded the launch of Open Banking and what it might mean for advisers, with clients willingly providing their financial data, third-party company services and products being utilised in order to ‘work’ that data, and it then moving seamlessly down the track to lenders for a much quicker mortgage experience.
If you sense a ‘but’ coming, then you’re on the right path, because theoretically while the process seems sound, it does all really hinge on one rather large, and fundamental, point. That being the agreement of clients to that financial data being shared by their bank with the other parties – it has seemed to me that those who are championing Open Banking the most, and therefore with perhaps the most to gain, may well have underestimated the willingness of clients to agree to this.
Indeed, recent research from the review platform, Trustpilot, might well have thrown an almighty spanner into the works of those anticipating a ‘new age’ for mortgage applications. It asked a range of consumers whether they’d be willing to let banks share their financial data with third parties and eight out of 10 people said no. Even with some significant incentives thrown in – rate/fee reductions and the like – this was not enough to persuade people to make that choice.
Perhaps we shouldn’t really be surprised about this, given the world in which we now live in. Anyone following the Facebook/Cambridge Analytica story and the constant stories about hacking, individual’s data being compromised, and the warnings about protecting information from fraudsters, might well understand the reticence of people to share their financial data, which might be perceived to be the most important data there is for most people.
Now, given that Open Banking has only just arrived and is still very much in its infancy, understanding might well grow and if it’s on the recommendation of a trusted adviser, then clients could begin to agree to this in greater numbers. But I suspect there will a large degree of uncertainty about how this data might be used, how it could be compromised, and what damage that might mean for the consumer. It will become an even more difficult sell, when the client realises that actually the adviser can still carry out their job however it might just take a little longer to go through the process, especially if there are some notable blanks in the financial information provided.
What this research however does reveal is that, just because a service becomes available and certain people and firms might believe it’s the best thing since sliced bread, there are no guarantees about how it will play out in practise. Consumer take-up for Open Banking will determine its success, but with two in five respondents to this survey feeling like the financial services market is less trustworthy than five years ago, then it would seem rather naive for us to believe that it’s a nigh-on certainty.
Perhaps consumers are going to take a lot more to persuade them that they are not simply putting themselves at further risk by agreeing to this release of data, and it might only take a few cases to go wrong, and that job will get even harder. While the benefits might be clear and obvious, it will be up to the industry to make a compelling case for take up, and it shows that when it comes to financial services and mortgages, we should never count our chickens before they’re hatched.
Richard Adams is managing director of Stonebridge Group