Open banking does have a lot of areas for possible implementation. However, the area of lending seems to be at the forefront of the developers’ focus. And for good reason. There is a lot of room for general improvement through the integration of advanced technological tools. This article will be dedicated to lending in open banking and how do the lenders operate in those market conditions. Let’s start!
Open banking and lending (Open Banking Lenders)
The standard process of getting a loan, a lease or a mortgage has significant challenges, both from the customer and the banks point of view. However, open banking concepts eliminate a lot of that through clever but secure and strictly regulated technological solutions.
Open banking lenders are able to usually offer more lucrative terms for the customer and the customer also gets more satisfaction out of signing the deal because the evaluation and verification take much less time than before.
The process of getting a loan consists of four major steps.
- Preparing the right documents
- Sending in the application
- Waiting for the verification
- Adding documents upon further request or simply obtaining the loan straightaway
This takes quite a bit of time in places where open banking isn’t implemented. Besides, without open banking, customers are limited to a few offers because it does take a lot of time to obtain them from the credit company. However, with open banking, consumers can expect to hear multiple offers and choose the one which is truly best.
How does open banking make lending better?
There are at least a few, very important contributing factors to this. Firstly, you have to mention the real-time data aggregation. Open banking technology allows service providers to collect bank account transaction history (with the consent of the user, of course) and almost instantly receive the information, necessary for the evaluation.
Once the info is obtained, a high-end and comprehensive AI tool can scan it and, according to a set of pre-established criteria, evaluate it for either auto-approval, auto-rejection or send it to responsible personnel for further inspection. This saves companies hours of manual labor each week and provides customers with a faster and more accessible service of getting a loan.
Separate income verification isn’t necessary as the tool can automatically gather information and scan it to make a verdict.
Why are users better off with open banking lending?
Well, because open banking lending doesn’t cost anything. It’s actually the opposite – by allowing a freer stream of information, you can find better deals, hence, a cheaper loan, lease or mortgage. This is because you can instantly get offers back from lenders and find the best option the same day. Beforehand, it might’ve taken you a few weeks or months, even, to go around all banks and ask for offers.
Furthermore, open banking is heavily regulated, so you don’t need to worry about data leaks or misuse of personal info.