Since January 2018, nine of the UK’s biggest banks have allowed competitors direct access to customer data as part of the Open Banking initiative.
With this data, it’s hoped that new products and tools can be created around the finance industry to help both banks and customers benefit from slicker, superior, and more efficient systems.
As agents lose money from the ban on tenant fees, Open Banking holds great potential for winning back some of that lost revenue.
The property industry, without surprise, has become one of the centres of keen observation for those startups working with the data made available by Open Banking. Although still in its early days, the progress has been rapid. We are already seeing numerous companies with a FinTech core don a PropTech crust.
But who are they, what are they doing, and can they actually help agents and customers simultaneously?
A crossover partnership
The most recent news about PropTech and Open Banking came earlier this week when it was announced that Goodlord has entered a partnership with TrueLayer.
“TrueLayer provides an interface between financial institutions and third-party applications over an API. This allows companies to capitalise…by providing secure, clear and simple access to banking infrastructure. TrueLayer [is] one of the first UK companies to be authorised and registered as a payment institution by the Financial Conduct Authority (FCA).”
What on earth does that mean? In this case, it means that Goodlord can embed TrueLayer’s technology into its referencing solutions to provide tenants with an instant, hassle-free assessment of their financial situation.
“Tenant affordability assessments using the lettings industry’s traditional methods can take days, are intrusive, prone to fraud, and directly stand in the way of making the renting experience simple and stress-free.” says Marvin Luksenberg, Goodlord’s head of referencing. TrueLayer, it is hoped, can help Goodlord change the industry standard.
Such innovation is great news for tenants, saving them time and money in a rapidly moving rental market. At the same time, it’s great for agents, too. The faster that properties can be filled, the greater the profits an agent stands to gain. On top of that, agents benefit from security and peace of mind, confident that the occupants are in a financially stable position.
From the rental market, such technology will inevitably step across into the sales market, hopefully throwing a rocket up the backside of the buying and selling process.
This is the best hope we have to close the always-too-high percentage of sales which fall through before completion. I have no doubt that we are going to see the ‘Onbrids’ make the most of Open Banking in referencing, it’s important that high street thinks about doing the same.
The end of the credit embargo
One of the most cruel catch 22s of the rental industry is the fact that without good credit, tenants are unlikely to find an affordable mortgage to help them onto the ladder, leaving them stuck in rented homes until they can build their score. But, renting offers people very little opportunity to build the necessary credit score.
Back in January 2018, online rental payments platform, CreditLadder, became the first in its sector to launch an Open Banking service that enables tenants to improve their credit score ‘without the need for a lengthy sign-up service or their landlords’ permission’.
CreditLadder records rent payments being made by a tenant and then passes the data to Experian, the partner credit reference agency. Experian then adds it to the tenant’s credit history. This helps tenants access more affordable mortgages, as well as other things such as credit cards and loans.
For agents, the main benefits are long-term. Simply put, the more people who can be given an easier road to purchasing property, the better. In the short-term, however, the benefits are still there. Alongside technology such as Canopy’s RentPassport, referencing innovation allows tenants, agents and landlords to more efficiently store and share all of the relevant rental documentation.
Open Banking is built on Application Programming Interfaces (APIs). Avoiding all of the technological mumbo-jumbo, APIs allow for different systems to communicate and work with one another. The result of systems being able to talk is one comprehensive picture made up of shared data.
The mortgage application is wildly complex and requires bucket-loads of personal data. When all of this data is stored on numerous, disconnected platforms, it takes time, money and effort to bring it all together. Open Banking and APIs put an end to this.
“Lenders have overcome a lot of changes recently,” says Duncan Bell, sales manager at Chartwell Funding, and we hope that API is now high on their agendas, so they can begin engaging with the broker community to ensure we are not keying data more than once.”
The idea of shared data also means that third-party companies can jump into someone's mortgage information and see that their mortgage rate is far from the best on offer; they can then recommend to that person that they switch over.
The time that is saved by a mortgage broker being able to simply tap into a person’s full financial history, from pay slips to loan requests, means that more mortgages can be processed.
For agents, this means less obstacles between finding an excited buyer and actually handing them the keys to their new home. Again, fall through rates are tackled and more revenue comes the agent’s way.
Open Banking is one of those things that sounds tiresome and boring, but the ramifications of its implementation are fascinating.
We are in the earliest days and already mortgages, credit scores, and background checks are being revolutionised. There’s an awful lot yet to come.
Most interestingly, in my opinion, is how rare it is to find government-enforced innovation that benefits so many different sides of property’s processes. In today’s environment, taking care of your clients is just as important as taking care of yourself, if not more so. For many in property, this notion still feels unfamiliar.
Agents have lost income thanks to the fees ban and it’s not going to come back if you don’t go hunting for it, it’s up to you to find new sources of revenue.
Open Banking has created a whole new paradigm of innovation and agents need to be exploring it, with passion.
*James Dearsley is a leading PropTech influencer and commentator. You can follow him on Twitter here.