Are mortgages worth opening up for?

Open Banking Expo Magazine spoke to Skipton Building Society, Enterprise Chambers in London and The Online Mortgage Advice Centre about the use of Open Banking data within the mortgage sector.

It’s a sobering thought for all professionals involved in banking and finance, that the average Brit is far more likely to get divorced than switch suppliers. It therefore follows naturally that those self-same customers will always be tempted to stay with the lender they trust when applying for a mortgage.

Now add to this pot Open Banking. With the media constantly reporting on escalating online fraud and huge data breaches in even the biggest organisations, the challenge for financial houses is how to tempt consumers to open up their financial history whilst making, often, the single most important monetary decision of their lives.

Skipton Building Society’s Director of Operations, Craig Gould said: “I think Open Banking will polarise customer behaviour. Over time there will be customers that will want to engage in the digital space, that are happy to trust data sharing, but you’re also going to have customers that won’t want to do that. There are a lot of younger customers that are also very wary of sharing data.

The top nine banks have all launched Open Banking mortgage offers, as have many other building societies alongside Skipton. But the corporate giants who used to rule this space now compete with challenger banks and third-party providers that are putting the consumer at the heart of their operations.

The challenges are obvious but it’s imperative lenders focus on the advantages and the benefits. “Open Banking is not just disruption for the sake of it,” said James Pickering, Senior Counsel and banking expert at Enterprise Chambers in London. “The four key potential benefits are increased choice, competition, innovation, and financial inclusion. Players in this new market should concentrate on these.”

Concerns have been expressed that competition may be hurt if the big lenders manage to make their systems so slick they generate business directly and cut brokers out of the mix. Brokers will need to stay in touch with their clients, understand the new technologies, and give advice in complex financial markets.

Terry Hall, MD of The Online Mortgage Advice Centre, said: “Brokers will need to demonstrate that they can add value. Most brokers offer advice plus a fulfilment service. Brokers need to justify the value of this advice if digitisation makes it easier for customers to complete the fulfilment part of these transactions themselves.”

Open Banking may be seen as a threat by some larger mortgage lenders but it also presents great opportunities for innovators, new providers, and customers. And incumbents should use their clout to seize the potential of open banking to create long-term differentiation and growth.