Jan 2020 | Credit Decisions

Open banking and the public sector

Working for a Credit Reference Agency as a specialist in the Public Sector a key question I often receive from my clients is:

Can we obtain actual income and expenditure data, for the following purposes?

  • Helping people understand if an applicant is eligible for public sector services.
  • Helping people maximise their benefits entitlement.
  • Ensuring resources are being allocated to the right individuals.
  • Identifying vulnerabilities when agreeing arrears payment arrangements.

You could say all the above questions are in the spirit of supporting the customer and potentially protecting the public purse.

Until recently in most cases the answer would be no, or at best require the organisation to be part of a data sharing agreement or fall back onto postcode level modelled data sources.

However, with Open Banking the answer is now be yes – subject to a consumer giving their consent to access their bank statement data

So, what is Open Banking?

Open Banking is an initiative which has been implemented by the government, the Competition & Markets Authority (CMA) and Financial Conduct Authority (FCA) which means that all UK banks  are mandated to allow consumers  to share their financial data with other organisations, provided those organisations are FCA authorised. This includes currently includes your bank statements,and payment card transactions.The key to Public Sector organisations using the data is the fact the individual is consenting for an FCA authorised company such as Experian to obtain the data for a particular use case.

Your transactions can be automatically categorised and presented in near real time in raw form or a standard Income and Expenditure format.

Open Banking is being implemented now in the Private Sector

You may have seen changes already, like:

  • Your mobile banking Apps that allow you to consolidate balances and transactions into one application
  • When applying for a mortgage you maybe asked to shortcut a process that may have previously asked for printed bank statements
  • Apps that provide advice on money saving by showing your categorised spending patterns
  • Automatic sharing of transaction data to provide personalised advice on repayment of debt

Take-up of the services has been growing steadily with over 180m successful data exchanges via secure API being made by organisations in October with Experian underpinning over a third of these, further statistics can be found here one the Open Banking Limited website.

All too good to be true?

In truth no, however the access of the data and uptake is reliant on the individual consenting to share their data and they also need the option of not using Open Banking without being penalised by the process.

From the work we are doing it’s clear that two aspects are key to the individual engaging with the process success:

  1. The ‘value exchange’, by consenting to the use of the data how will I benefit?

For example, will it save me time or provide a more accurate assessment of my circumstances leading to a better outcome.

  1. A ‘trusted partner’People are more likely to engage with a brand that already is known for being a custodian of their data. TMany organisations are partnering with Experian to – as brand which is trusted to manage a consumer’s financial data – support this process.

Example Public Sector use case:

To help spark ideas and by way of an example use case, today many Housing Associations undertake their own affordability assessments using self-declared Income and Expenditure forms or asking for bank statements,  manually processing through a combination of external calculators to understand benefits positions and/or complex spreadsheets with modelled data to predict affordability.

Imagine a world where the prospective tennant could simply consent to having 12 months of their bank account transactions categorised into Standard Financial Statement, therefore providing accuracy and efficiencies over the current process.

Want to find out more?

Experian is an FCA accredited Account Information Services Provider (AISP) which has taken the lead on Open Banking. We’ve been operational for over 12 months and already have wealth of insight and information on how best to deploy Open Banking as a service. To discuss your requirements please complete the form and we will be in touch.

Visit our latest thinking hub on Open Banking.