Robert McKechnie, head of product at Equifax UK, a data analytics and technology company, has argued that Open Banking can help with lending during the COVID-19 crisis.
McKechnie believes that data-sharing via Open Banking (after obtaining customers’ consent) will help with giving potential lenders the information they need to assist the financially vulnerable or underserved community. Open Banking can restore consumer confidence in credit assessments during these difficult times and also help businesses with their digital onboarding procedures.
Open banking, which is somewhat similar to PSD2 in the European Union, requires large financial institutions to share anonymized user data with approved third-parties in order to promote healthy competition in the financial services sector while improving the customer experience.
As first reported by Peer2Peer Finance News, McKechnie noted that across the United Kingdom, the impact on personal finances has been “severe.” More than four million residents have requested emergency payment freezes and nine million workers have been asked to go on temporary leave, McKechnie revealed.
McKechnie noted:
“Over the next few months, many will suffer further income shocks, and inevitably fall into arrears. During this period, Open Banking, and its use of up-to-date bank transaction data, will be integral in giving lenders an extremely accurate and detailed picture of a consumer’s finances.”
He explained that this allows service providers to make better decisions regarding credit and affordability, and identify people who might need special assistance because they are financially vulnerable.
McKechnie thinks that when the UK economy begins to recover, the real-time data and insights that Open Banking provides will be quite helpful when it comes to restoring lenders’ confidence and “reinvigorating the supply of credit for businesses and individuals.” He believes that this should have a “positive knock-on effect, expediting the return of normal levels of business and consumer spending, and stimulating the economy.”
Andréa Toucinho, the Director of Studies, Prospective and Training of Partelya Consulting and Country Ambassador for France of European Women Payments Network (EWPN), stated in June 2020 that it’s necessary to develop a European vision or roadmap for adopting Open Banking and Open Finance platforms.
She suggests that European countries need to harmonize their different approaches to Open Banking. She recommends standardizing relevant APIs at the European level.
Norbert Gehrke, founder and representative director at Tokyo Fintech, an initiative that supports community-led innovation in Japan’s financial services sector, noted in May 2020 that Europe’s Open Banking guidelines include provisions to permit “limited free use” of the compulsory APIs. He confirmed that the Financial Services Agency in Japan has adopted a “hands-off” approach and allowed different parties to negotiate the commercial terms on their own.
He added:
“The banks wish to recoup the cost of the Open Banking implementation, which might make the fees prohibitive for startups, especially if it is based upon costly and inflexible legacy architecture.”
He believes that digital banks will eventually “distinguish themselves by opening without restrictions, thus creating the platforms the [Open Banking] regulation intended.” He feels that there’s “significant value to be captured by Open APIs in the SME funding space.”