The current lending market has seen the emergence of software developments that help to streamline processes for loan origination and credit assessment.

Increasingly, shifting consumer expectations and technology-led changes in the industry have taken financial institutions to be increasingly aware of the need to update their practices and make way for innovation, that can help to streamline the journey and enhance customer experience.

Borrowers want processes to be fast and simple. Understandably, traditional practices and a rigorous framework in lending have presented a challenge – many lenders use paper-based approvals and manual procedures that cause the decision-making process to be slow, lengthy, and complicated, especially when it comes to data management. These intricate methods are also susceptible to lack of uniformity and human error. But this is where technology has come in to change the game.

Fintech tools are penetrating the industry and helping lenders to improve efficiency and productivity in the journey of assessing creditworthiness and risks, so that it’s no longer a time-consuming, laborious task. In a matter of a few clicks, software applications can process a comprehensive view of documents required by the lender.

Specialised automated software uses intelligent content recognition to verify documents, review and categorise transactions, and this happens 24/7, reducing manual efforts and time frames to a minimum. With automation, the lending process can be streamlined to save time and reduce costs, resulting in quicker turnarounds that contribute not only to a healthier client base, but also customer satisfaction.   

As technology continues to set practices on autopilot, leading competitors are now looking to accelerate their decision-making processes with automation tools – and one more market force that cannot be ignored has entered the picture: Open Banking. Whilst automation has presented benefits mostly for lenders, with ways of enhancing productivity and efficiency; Open Banking brings advantages for both, businesses and also consumers.

Open Banking has been driving competition in the finances services industry for the past couple of years, ever since it was brought to life by the UK’s Competition and Markets Authority (CMA) to provide customers with more choice and better access in terms of service providers.

Open Banking, and the over-arching regulation underpinning the scheme, PSD2, have enabled individuals’ financial data-sharing in a secure way, giving customers control over their data, whilst urging banks and tech start-ups to innovate in new service developments. The result is a solution that is more robust than previous methods of app-based data sharing. What makes it more secure, is that the specifics of the data shared and those who are able to access it, are determined by the user. The industry is also heavily regulated, and any customer will need to opt-in to data sharing on any platform they wish to use. Furthermore, the information shared through Open Banking is subjected to strong security and encryption to ensure that it doesn’t fall into the wrong hands.

The input of Open Banking in this evolving landscape is exciting the industry with a world of possibilities; but how can lenders really capitalise on these opportunities?

Lenders and brokers can partner with FCA-authorised Open Banking service providers, known as Account Information Service Providers (AISPs), to request customers access to their financial data in a completely secure way, to then incorporate data into applications and risk models.

Speeding up affordability checks and income verification

Information available through Open Banking can cover banking transactions, bank statements and credit history – providing a full, accurate picture of an individual’s financial circumstances, which is a key step in the process of loan applications.

The financial data shared through regulated providers can be used by lenders and loan brokers to quickly verify income, perform affordability checks and even categorise transactions. In the credit process, the implementation of open banking significantly reduces friction. Because the entire process takes place online, there is no need to collect copies of bank statements from borrowers, reducing time from application to acceptance to a minimum.

Regulated service providers can embed the Open Banking functionality into a lender’s online application, to enable borrowers to share financial data and transaction history. The insights provided in return allow the lender to streamline income verification and affordability checks, simplifying tasks to only a few minutes.

As the information shared can serve for completing identity checks and income verification directly with users’ banks, the implementation is also a powerful resource for companies in KYC/AML processes.

Integrating Open Banking with automation tools

Automations tailored to the industry are now able to incorporate Open Banking into the decision-making process to provide a solution that speeds up procedures for lenders and loan brokers, and also translates in a smooth and secure way for consumers to share their financial data.

By automating the lending process and powering data-sharing with Open Banking, lenders can overcome the challenge of complicated procedures. Integrated solutions present powerful ways to facilitate the process for quicker, better-informed lending decisions. On the other side, borrowers can benefit from more efficient application processes and enhanced experience, quicker approvals, plus a product offering better tailored to their financial situation.

The ability to collect data securely and instantly, and to get accurate insights directly from consumers’ banks can be easily attainable for companies by partnering with FCA-authorised providers, who can help businesses to embrace the full potential of Open Banking and get the edge in the competitive game.

Caterina Bassano, Marketing Executive at HubSolv 

HubSolv Limited is an FCA-approved Registered Account Information Service Provider (RAISP), and it’s on hand to help forward-thinking firms in lending and financial services to make the most of Open Banking. HubSolv Messenger, HubSolv’s integrated client portal, combines innovations in automation and Open Banking functionality to improve efficiency in the process of ID verification, credit checks, bank statements and AML reports, for quick, accurate affordability assessments that can improve lending decisioning. For more information visit: www.hubsolv.com