I remember a time when your banking essentially used to be private between you and your bank. And while credit reference agencies have been there for eons, their algorithms have been based on your performance in repaying what you owe per the agreement.
It seems Open Banking is starting to facilitate third-party organisations to rifle through your transactions to determine whether you’re worthy of a new financial product. We already have the likes of ClearScore and Credit Karma wanting us to link our bank accounts to them.
I lead product development on integrating Open Banking into credit assessment for an SME.
We deal with those not catered to by mainstream provision due to credit or income, so checks are relatively stringent. Prior to all this 2 months statements was a standard requirement which often involved quite a bit of rifling - as there was no immediate identification of particular types of payment. In that sense it’s a little bit of an improvement on and old school & rather too personal process.
That said - there are so many income/expenditure variables and open banking is still very much in its infancy in this space. The open banking partner I work with has struggled to categorise transactions & it is all text based with no insight as to the underlying payment type which imo would make it a lot more efficient. You are still obliged by the regulator to run CRA searches in most instances, so it’s a technology working alongside this rather than alone for now.
The removal of the 90 expiration does, in theory, allow consent to be refreshed at will unless someone opts out. This is possibly the most concerning part imo.
The jury is still out - I’m not sure it’s all that beneficial for those applying for mainstream provision as this can still be done via automated credit checking in most instances. In the space I work in, there is a lot of work to do to make aggregation/metric analysis of API data accurate for credit assessment/to work alongside bespoke lending criteria.
I share your concern. I think there is a valid use-case (like the one @Rexx described where it replaces an existing manual process) but my worry is that if getting all my txn details via open banking becomes as simple/cheap as doing an old-fashioned credit search, why would lenders not do the enhanced version?
People who have good credit acceptance as things stand can only lose from this IMHO.
Unless I was to grant Open Banking access to all of my accounts, and there are over thirty, not including my credit cards, and not all are accessible yet to Open Banking anyway, I fail to see how anyone could accurately assess my viability for a financial product. Their holistic view of my finances would be incomplete.
For example, I have more available to me in savings than my aggregate credit limits on cards, so could comfortably afford to max them all out, then pay them off. No company would know that with my current set-up.
And I am not alone in having many, many accounts. Check out the MSE forum, as well as here, and maybe Monzo forum, and you will find many people have their financial affairs spread across many providers.