How open banking could change financial advice

Open banking could mean a much slicker and not as paper heavy mortgage process. If underwriters can see how your finances work, it could also cut a lot of questions out. Lets be honest, we still need to mortgage industry to drag itself into the 21st century.

Open Banking as a stand-alone item for mortgage underwriting and processing is a little bit like having one square wheel on your car, what's needed to make a difference is true Open Banking integration. Sudden access to loads of client banking data quickly just means a lot more manual work to do unless you have all your ducks in a row and allow the algorithms and AI systems to take over. Over the past 18 months at www.MortgageShop.com we have been working our systems to integrate Open Banking within our existing data systems and allowing the code to do all the heavy lifting of the reams of bank account data. Open Banking allows you to validate applicants' incomings and outgoings but also the fine details of what monies that are being spent are deemed as essential and what are what could be called voluntary - it makes squeezing every pound of mortgage offer out of lenders much more professional. We are aware of only a handful of UK lenders using partially integrated Open Banking today.

"A useful feature of Open Banking will be to have an accurate figure of family spending. Often when we ask for details of expenditure, we get a blank look. We provide families with a document to complete to detail their outgoings but quite frequently this includes estimates. If Open Banking will pull through income and expenditure from bank statements and credit cards, it will enable us to work with more accurate information which will improve the accuracy of our plans."

Open banking has the potential to completely streamline the mortgage application process. For example, brokers wouldn't need to request bank statements because with the client's permission, we could automatically access them.

Similar functionality is already available for credit reports, but ideally, most or all the paperwork could be eliminated if we could access digital copies of company accounts, tax calculations, payslips, and so on. It would certainly make a broker's life easier.

Open banking has the potential to revolutionize the financial advice industry. By granting consumers greater access to their financial data, it enables advisers to provide more personalized and tailored recommendations. This increased transparency can lead to more effective advice for both IFAs and mortgage advisers. However, it is crucial to address the potential risks associated with open banking, such as data privacy and security concerns. Striking the right balance between innovation and safeguarding consumer interests will be key in harnessing the full potential of open banking.

From a Mortgage Advisors' point of view, this could take a lot of the heavy admin out of the process and allow for more focused client interactions.