As new lending starts to overtake the repayment boom seen during the COVID-19 crisis, research from digital bank Zopa reveals that more than 40% of UK-based consumers would make use of Open Banking to “apply for credit if it improved their chances of getting an offer, gave them access to better rates, or made the application faster and hassle free.”
As mentioned in an update from Zopa:
“Despite that, 8 out of 10 consumers have never knowingly used Open Banking. This disconnect reveals a strong demand for the benefits that Open Banking can bring customers, despite a lack of awareness of its underlying proposition.”
The Open Banking ecosystem is already benefiting almost 4 million active users and is growing thanks to stable APIs, new consumer-facing apps, as well as the United Kingdom’s “forward-looking” or progressive regulations.
As noted in a blog post by Zopa:
“Adoption has mainly been driven by use of account aggregation services – by far the simplest and most popular use of Open Banking today. Aggregation has a positive impact on customers, with 50% stating that viewing all their banking products in one place makes them feel more secure.”
Research reveals that UK consumers presently use Open Banking to do all of the following:
- To view all bank accounts in one place – 34%
- To keep an eye on all savings and investments – 28%
- To move money between bank accounts and savings – 27%
But Zopa’s latest research found that the launch of Open Banking to previously untapped customer requirements, such as gaining access to credit, might “rapidly accelerate this adoption, benefitting up to 40 million active users by 2025.”
The research further reveals that UK consumers would use Open Banking “to apply for credit” if it helped them with the following:
- Simplify the application, making the application faster and hassle free – 44%
- Unlock better rates, accessing better rates on financial products – 43%
- Secure an offer, improving their chances of getting an offer from a lender – 40%
Zopa’s report on Open Banking “suggests that these benefits are often best delivered when fintechs work together to deliver customer value in a simple, easy to use way.”
As noted in the update:
“A good example is Zopa’s partnership with ClearScore, which used Open Banking to assess eligibility for Zopa’s credit card. This resulted in a 37% increase in the number of users eligible to apply for a Zopa credit card, improving financial inclusion for thousands of new customers who may have previously been declined due to thin files.”
Within a week of its introduction, over 43,000 ClearScore users “saw a Zopa offer which would not have been available to them based on credit report data alone.”
Tim Waterman, Chief Commercial Officer at Zopa, stated:
“We are pleased to be part of a group of fintechs at the forefront of innovation, bringing the benefits of Open Banking to millions of new customers. We already use Open Banking verification to ease application journeys and to power tools like Borrowing Power which help our customers improve their financial health.”
Waterman added:
“By using Open Banking to calculate credit eligibility for the first time, we are helping thousands more customers access our award-winning credit products in a way which they may not have been eligible to previously. We believe this further supports our vision to build the best place for money in the UK.”
The complete report is accessible here.
At present, Zopa serves around half a million clients. Since receiving its full banking license in June of last year, the Fintech firm has attracted over £600m in customer deposits for its fixed term savings accounts, “issued 130,000 of its British Bank Award-winning credit cards, and became a top 10 credit card issuer.” It’s presently approving 15,000 new credit cards each month.
Survey Methodology: Zopa “surveyed 2000 members of the general public through Censuswide between 13.05.21 – 17.05.21 and 27.08.21 – 31.08.21.”
According to ONS data set: Persons “by single year of age and sex for local authorities in the UK, mid-2020, there are currently 52,890,044 adults in the UK.”
TrueLayer predicts that by 2023, “60% of the UK adult population will have used open banking at least once would be: 31,734,026.” Based on this, by 2025, Zopa “estimate that 40 million consumers will have at least tried Open Banking.”