Mastercard’s recent upgrade to its ‘Open Banking for Lending’ program is more than just a technological advancement – it’s a recognition that the financial landscape is shifting toward a more inclusive and data-driven approach. This move highlights the growing awareness within the industry of the potential that Open Banking holds for enabling financial inclusion, a shift that is both timely and necessary in today’s digital economy.
Open Banking, a system where consumers can securely share their financial data with third-party providers, is poised to revolutionise the way financial services are delivered. This approach not only empowers consumers by giving them control over their financial data, but also enables the creation of more accurate and personalised financial solutions.
The outdated methods of income and employment verification, which have long relied on manual processes, are rapidly becoming obsolete, making way for systems that prioritise efficiency, accuracy, and fairness.
The inefficiencies of traditional verification processes
For too long, the financial industry has relied on outdated, labour-intensive processes for verifying income, employment and assessing financial health. Customers are often required to gather a range of documents – pay stubs, tax returns and bank statements – each providing only a limited view of their financial situation.
AperiData’s Stephen Ashworth
These documents are then passed on to lenders, who must manually verify the information, a process that is not only time-consuming but also prone to errors. This can result in high decline rates, often unfairly.
That’s because this traditional approach places a significant burden on the customer, who may struggle to find the necessary paperwork, or inadvertently submit incomplete or outdated information.
Inaccurate or missing data can lead to incorrect decisions, such as being denied credit, or a loan, that the customer is fully capable of repaying. For lenders, the inefficiency is twofold: they waste valuable resources verifying data and risk making poor lending decisions based on incomplete information.
The power of data-driven decisions
The inefficiencies of traditional verification processes underscore a broader issue within the financial industry: a reluctance to fully embrace the power of data. In an era where digital transactions and online services are the norm, the financial sector must leverage data to its fullest potential to foster an environment of increased choice, trust, and transparency.
At AperiData, we place real-time, hyper-personalised data into the hands of decision-makers – whether they are lenders, property rental providers, or utilities companies – allowing for the most accurate and fair decision-making possible. We aim to go beyond the industry’s standard practices, creating models that are not only more accurate, but also more ethical.
This data-driven approach has tangible benefits. For example, our technology has enabled organisations, like the Citizens Advice Bureau, to reduce the time it takes to give advice from three weeks, to just three minutes.
Additionally, we have overturned nine in 10 marginal declines at Yorkshire Credit Union, demonstrating the profound impact that accurate data can have on financial decision-making.
Ethical data usage: A business imperative
However, the power of data comes with a responsibility to use it ethically. The benefits of Open Banking will only be fully realised if businesses commit to transparency and ethical data usage. Consumers need to trust that their data is being handled responsibly and used to benefit them, not just the bottom line.
By leveraging the most accurate and up-to-date information, we can enable a world where decision-making is fair, ethical, and transparent. This, in turn, bolsters the economy by empowering businesses to say “yes” more than they say “no”, driving consumer trust, promoting financial inclusion and improving customer outcomes.
The future of financial services
The future of financial services lies in the ability to harness the power of data to create more personalised, efficient, and inclusive financial products.
Mastercard’s decision to upgrade its ‘Open Banking for Lending’ program is a step in the right direction, but it is just the beginning. The true potential of Open Banking will only be realised when businesses across the industry commit to using data ethically and transparently.
By embracing data, prioritising trust, and committing to creating a financial system that is fair, efficient, and inclusive for all, we can unlock the full potential of Open Banking and set a new standard for the industry.
Stephen Ashworth is chief executive officer of AperiData
