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COVID-19 has had a dramatic effect on many people’s finances, altered consumer behaviour and disrupted working environments. As we navigate a path out of the lockdown, Open Banking has the capacity to support financially vulnerable people, kick start lending and enable the financial services sector to adjust to a state of altered normality. 

Across the UK the impact on personal finances has been severe, with over four million people taking emergency payment freezes* and nine million on furlough**. Sadly, 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. This allows them make more informed decisions around credit and affordability, and identify financially vulnerable people who need support.

Once the economy starts to recover, the extra level of real-time data and insight Open Banking offers will be vital to restore lenders’ confidence and reinvigorate the supply of credit for businesses and individuals. This will have a positive knock-on effect, expediting the return of normal levels of business and consumer spending, and stimulating the economy.

 Open Banking is also primed for the new environment of less face-to-face contact, helping companies accelerate their digital onboarding processes safely and securely. It improves automated, digital verification rates for identity, income and expenditure, helping combat the risk of fraud and providing customers with a more positive, less onerous experience.

 Open Banking is gaining momentum by the month and we are entering a new, more mature phase of its development. Lenders have built out customer journeys, integrated technical aspects, tested, learnt and gained confidence in the new Open Banking approach. The initial labour and capital investment is bearing fruit and we expect the uptake in Open Banking to continue to grow throughout 2020.

Sources

* FCA, June 2020, as cited in the Daily Telegraph

** Treasury office, June 2020, as cited by BBC