Understanding open banking and why it should be considered for your self-employed mortgage customers

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Richard Beardshaw Head of Sales | HSBC UK Intermediary Mortgages
|
6th September 2021
open banking connected network

The learning objectives for this article are to:

  • To understand what Open Banking is
  • To explain the process behind Open Banking
  • To identify how using Open Banking could reduce your customers' application to offer timescales

What is open banking?

Open Banking allows self-employed mortgage customers to connect their company’s bank account(s) to share their financial information in a safe and secure way, removing the requirement for the provision of physical statements. This information will then be made available to the mortgage lender so that the application can be progressed.

Open Banking is the perfect example of technology as a game-changer in mortgage processing. Lenders get to see the information needed to make a decision without waiting for documents to be gathered and uploaded.

In March 2021 HSBC UK partnered with Experian to offer self-employed mortgage customers a quicker and easier method for sharing their business bank statements.

The Open Banking process explained

Customers will need to provide their consent to Experian to have one-time access to their account(s) to share statement data with us for use in the mortgage underwriting assessment. They will also have the option to download the statement data as an excel file to share with you for your records.

With Open Banking, the mortgage lender gets the information they need without having to go back and forth for more customer documentation. They extract the details they need for their underwriting assessments from Experian. They will just look at the credits, not the customer’s spending and will only have temporary access so they can make focused lending decisions.

Customers will need to provide their consent to Experian to have one-time access to their account(s) to share statement data with us for use in the mortgage underwriting assessment. They will also have the option to download the statement data as an excel file to share with you for your records.

With Open Banking, the mortgage lender gets the information they need without having to go back and forth for more customer documentation. They extract the details they need for their underwriting assessments from Experian. They will just look at the credits, not the customer’s spending and will only have temporary access so they can make focused lending decisions.

There will be guidance provided throughout the process, and it should only take a few minutes to complete, here is a brief summary of the steps a customer will need to follow to share their statement data through open banking:

  1. You will need to check that the bank the customer uses for their business accounts participates in open banking and that the customer already manages their account online and has access/permission to share the statement data with the mortgage lender via Experian. Here is a list of the banks currently participating:
    • Allied Irish Bank
    • Bank of Ireland
    • Bank of Scotland
    • Barclays
    • Chelsea Building Society
    • Coutts
    • Danske Bank
    • First Direct
    • First Trust Bank
    • Halifax
    • HSBC
    • Lloyds
    • M&S Bank
    • Mettle
    • Monzo Bank
    • Nationwide
    • NatWest
    • Revolut
    • RBS
    • Santander
    • Ulster Bank
    • Yorkshire Building Society

2.       You will be given a web address link to share with your customer which they will need to visit the Open Banking website and complete the process.

3.       They will need to read and accept Experian’s T&C’s and Privacy Policy. Customers will need to provide consent for Experian to have one-time access to their business bank account(s) to retrieve statement data behalf of the mortgage lender.

4.       Input the business and personal details (note: there is a separate journey for Limited and Non-Limited companies).

5.       Select the bank which holds the business account(s) and provide consent for Experian to connect with them.

6.       Click ‘Connect your Account’ which will redirect the customer to their bank's internet banking log-in page (or the app will launch on a mobile or tablet) where the customer will need to sign in as normal.

7.       A consent page will appear where the customer will choose which account(s) to share, and provide their final consent.

8.       Following consent, they will be redirected back to Experian where a message will appear ‘Account Successfully Connected’.

9.       They will need to click ‘Return to Dashboard’ before selecting ‘Submit your Application’. This completes the process.

The customer will also be given the option to download a copy of the data that has been shared with the mortgage lender for them to provide to you for your records.

If your customers are unable to use Open Banking, you can still upload statements manually.

How Open Banking could reduce the mortgage application process

Many lenders currently ask self-employed mortgage customers to provide 3 months’ worth of commercial statements to support their application, but this can be timely and often slows down the offer process.

Open Banking offers a huge potential to speed up the underwriting process, as it offers a quicker and easier method for sharing their business bank statements, therefore removing the need to acquire three months’ of statements in a physical form.

Open Banking will have a transformative effect on the options available to mortgage borrowers. It offers new ways to assess income and expenditure, assisting self-employed customers and helping mortgage lenders to understand their net incomes and anticipate their needs. This innovation will help mortgage lenders better understand peaks and troughs in an individual’s income, helping identify the right mortgage product for the customer.

Along with API technology integrating systems, it’s clear that submitting a mortgage application will become easier in the next year or two. As a result, moving to offer and completion will be quicker too.

As technology evolves to do more of the heavy lifting on processing, lenders who continue to invest in their people will be able to give you a more personal and professional service, just like the service you provide your customer’s with every day.

Here are a few frequently asked questions about Open Banking:

If a customer uses a personal bank account rather than a business account can they still use Open Banking?
Yes, the mortgage lender will only pull through credits to the account and not outgoings

Can the broker complete the Open Banking process on the customer’s behalf?
No, the way the process works is the customer completes the personal information and consents to sharing the information. They are then taken to their relevant business bank where they need to log in and complete the process.

If a mortgage application is cancelled and a new one submitted would the customer need to grant consent again?
Yes, this is one-time access/sharing only so it is likely that the data will have expired by the time a new application is submitted.

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To recap, this article has helped you...

  • To understand what Open Banking is
  • To explain the process behind Open Banking
  • To identify how using Open Banking could reduce your customers' application to offer timescales
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