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UK EDITION February 2020
THE OPEN BANKING SPECIAL We’re dedicating a whole issue to Open Banking, including news, articles, and opinion pieces about the global movement that is transforming the industry
In this issue Welcome Page 03
Open Banking news Page 04
Elevate adopt OBV Page 06
A record hike Page 08
Find us at the Summit Page 09
Have you got a crystal ball? Page 10
OpenBankVision Page 12
Make better decisions Page 13
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Snapshot The ability to instantly request bank statement data
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02 | Metrics Monthly
February 2020 | UK Edition
Welcome
The impact that the Open Banking movement is having on the way that products and services are being con- sumed across the world is undeniable. This month’s special edition of Metrics Monthly focusses on the rise of Open Banking, how is it evolving globally and the possibilities available as a result. You may remember that our January issue of Metrics Monthly looked at how Open Banking regulations are evolv- ing across the world, and this issue we’ve taken it a step further to bring you updates on the latest global Open Banking developments. We’re dedicat- ing a whole issue to the subject, includ- ing news, articles, and opinion pieces about the global movement that is transforming the industry. Our headline piece this month asks ‘have you got a crystal ball?’ as we contemplate how lenders might be able to make lending decisions without the ability to see into an applicant’s future. Head of Operations, Paul Brown, dis- cusses the fundamental differences between creditworthiness and afforda- bility, before considering how lenders
might be able to paint the best picture of their applicants in order to accurately determine whether they will be able to pay back a loan. On page 13 you can find out more about our own Open Banking platform, OpenBankVision, and how the revolu- tionary software might be able to help you make better lending decisions. This month’s case study looks at how responsible lender Elevate has seen an uptake in applications since imple- menting our OBV platform. Elevate were initially cautious about introducing the new technology involved in Open Banking, but were really pleased with the uptake and performance of the tool. You can read more about why Elevate implemented the platform here. With new legislation and emerging industry standards developing daily, there’s no doubt that the Open Banking movement is changing the face of the credit industry. We couldn’t think of better topic for this special edition of Metrics Monthly than Open Banking and we hope you enjoy it.
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Metrics Monthly | 03
Canada puts security at the top of its Open Banking list Open Banking news
Ahead of the second phase of its Open Banking review, Canada is focussing on data security. An advisory committee looking at the feasibility of Open Banking in Canada, recently announced plans to turn its attention to ensuring consumers can share their personal financial data safely and securely. The key question the committee will raise is: how will regulators manage data security and privacy risks?
Established by the Department of Finance Canada in 2018, the committee aims to investigate whether the country should follow the UK’s lead in making it easier for banking data to be shared with third party financial services. The federal government hasn’t formally approved Open Banking in Canada, but many Canadians are already sharing their data with third parties, so ques- tions surrounding security and data protection are at the forefront of the review. With Open Banking already prevalent in the UK and several other
countries across the world, advantag- es of the initiative include being able to provide a more accurate snapshot of a finance applicant’s affordability by allowing providers to easily view bank statement data through revolutionary new platforms such as LendingMetrics’ OpenBankVision (OBV) . According to the committee, ‘the poten- tial for consumer-directed finance to deliver meaningful benefits to Cana- dians is evident’, but how and when Canada joins the Open Banking band- wagon is still undecided.
Only 60% of SMEs are aware of Open Banking possibilities
A new report has revealed that only 60% of UK small businesses know about Open Banking and the huge opportunities that can potentially come with it.
The report - by Intuit Quickbooks - looks at the opportunities that Open Banking can bring to small business- es in the UK but reveals that only three fifths of SME decision makers are aware of the differences the initiative could make. Vice President of Intuit QuickBooks, Chris Evans said: ‘The Open Banking revolution will empower the small business owners that want to do things differently and embrace new and better ways of working’.
The report also identified three trends that Open Banking would bring, such as better data intelligence, hyper-con- venience and more control over data ownership. The potential for a custo- misable approach to financial services will see SMEs being able to tailor their products to suit their needs and could allow small businesses to access the best financial products in order to grow faster.
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February 2020 | UK Edition
Will Australia’s Open Banking act make controversial screen scraping a thing of the past?
Our January issue of Metrics Monthly looked at how Open Banking regula- tions are evolving across the world, and one of the big talking points from this surrounds Australia’s version of Open Banking: the Consumer Data Right (CDR). The act will initially focus on transac- tion data, but is likely to broaden into other industries such as energy and telecommunications. Australia was due to trial the act with the ‘big four’ banks in February 2020, but the deadline was revised to July 2020 last month. With the potential for Open Banking to
become widespread in Australia, the controversial practice of screen scrap- ing has been brought back into the spot- light. Chief Executive of the Common- wealth Bank of Australia, Matt Comyn, recently spoke out against screen scraping, and said that the activation of Open Banking should make the practice redundant. Comyn hopes that after the CDR goes live, ‘screen scraping technol- ogies would no longer be necessary’. The practice, which involves account holders providing their details to a third party service that then accesses their information to provide customer data to another service has been under scruti-
ny because it requires providers to store users’ credentials such as passwords or memorable data. Whilst service providers only use this practice to extract data, there is a risk that these credentials could be leaked, which would compromise consumers’ bank accounts and other accounts that they use the same log in details for. As a result, consumer and financial law advocates are calling for screen scrap- ing to be banned. With the imminent implication of the CDR in Australia, this could very much happen due to Open Banking being able to provide the same data in a much more secure way.
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Metrics Monthly | 05
Elevate adopt OBV Responsible lender Elevate sees an uptake in applications since implementing LendingMetrics’ OpenBankVision
become mandatory for the sector. They have a 20% operating cap on profits to minimise the interest that customers pay, encourage early repayment and offer flexible repayment schemes. They have never charged fees and give cus- tomers five days to change their mind and return the loan, without paying a penny in interest. Elevate invests significantly in under- writing, technology, data science, and advanced analytics to enable them to provide loans to sub-prime consumers who are often turned away by main- stream lenders.
Elevate’s customers’ right to credit remains their priority and is realised through their commitment to offering the best products to help customers today and tomorrow, on their journey to a better financial future. Choosing LendingMetrics Elevate wanted to take a cautious approach when introducing the new technology involved in Open Banking. They also didn’t have a predefined view of consumer uptake, so they wanted to work with a partner that they know and trust. Elevate had previously worked with LendingMetrics, so their
Elevate Credit is reinventing the sub- prime lending industry by giving con- sumers access to responsible and transparent credit options. In the UK, their consumer brand, Sunny, provides lending solutions from £100 to £5000, with a commitment to transparency, fairness, and flexibility. Elevate’s business was built with fair lending practices at its heart and founded on principles that have since
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February 2020 | UK Edition
OpenBankVision (OBV) product was a clear contender and one of the most highly regarded solutions available. Elevate’s main priority was quality of data and categorisation, and they felt confident that LendingMetrics was able to provide precise categorisation of high-quality bank statement data. Approach In a challenging and changing regulato- ry environment, Elevate began looking to Open Banking as a powerful tool to better understand and verify the finan- cial position of their customers. It was very important to them that customers continued to benefit from their easy- to-use application journey, and OBV’s pre-existing user journey proved clear and simple to navigate. Elevate initially chose to use the lite version of OBV - which uses LendingMetrics’ consumer friendly oohMoolah brand – and now also have the ability to use their own branding and styles instead, which will integrate OBV into their customer journey even more seamlessly. Looking forward, Elevate will seek to expand their use of Open Banking to help with risk decisioning, customer experience and financial education.
The implementation process was extremely smooth and LendingMet- rics’ OBV team worked very well with Elevate. The high levels of communica- tion throughout the process meant that Elevate were able to achieve everything they wanted and began using OBV within a short timescale. Result The conversion rate has proved very positive so far. At the verification stage in the application journey, Elevate offer several different options for customers to provide the required data and the majority of applicants have opted to share their bank statement data using OBV over using a manual method. Cus- tomers’ have fed back to Elevate that they really like the system and have found it easy to use. Since implementing OBV, Elevate have seen an uptake in applications, as it offers customers a clear way of proving details such as their income and other credit commitments. Operationally, Elevate have seen more consistent results, which has in-turn allowed them to improve upon and speed up their processes. David Wylie, Commercial Director of LendingMetrics said, “we are delight-
ed to be working with such a strong brand as Elevate and are thrilled that they have chosen OpenBankVision as their open Open Bbanking supplier. We have invested heavily to bring a power- ful, fast, and secure solution to market which delivers some of the best cate- gorisation available anywhere. We look forward to growing the relationship with Elevate”.
“
We are really pleased with the uptake and performance of our Open Banking verification tool so far. Not only has the integration been seamless and painless, we can tell from early indicators that our customers love this new feature too. Delivering a better experience to our customers while improv- ing operational efficiency is a double win for us.
”
- John Batley
Director of Credit Risk, Elevate Credit
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Metrics Monthly | 07
A record hike
Record 120% hike in transactions at LendingMetrics Loan underwriting transcations cleared by automated underwriting technology broke through the 10 million threshold at LendingMetrics for the first time this week. Auto Decision Platform (ADP) , our multi-award-winning credit decisioning platform, saw the biggest increase over the preceding 12 months with volumes jumping by just under 170%. Our aggre- gated credit data service, LMX, and Open Banking platform, OpenBankVi- sion, saw significant increases at 87% and 144% respectively.
our people and our customers to make LendingMetrics the go-to partner for forward thinking lenders and the best place for our team to thrive and shine. These numbers prove that our offer- ing resonates strongly with the market and lenders are migrating to us in ever greater numbers. Once with us, almost without exception, they scale up and grow with the help of our award-win- ning automation.”
We are pleased to announce that we have processed over 10 million trans- actions on our platforms during the last 12 months. The figure represents an increase of more than 120% on the pre- vious year, with all sectors of the busi- ness surging.
David Wylie, LendingMetrics’ Commer- cial Director and co-owner, said: ‘We’ve relentlessly invested in our products,
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February 2020 | UK Edition
Find us at the Summit
Next month, as part of Credit Strat- egy’s Credit Week 2020, we will be hosting an exhibition stand at the Credit Summit in London. You might remember that Last Novem- ber our Business Development team enjoyed hosting a stand at the Lending Summit, another conference ran by Credit Strategy, which was a great opportunity to meet with credit profes- sionals in the industry. The event was followed by the Lending Awards which
saw LendingMetrics bring home not one but two awards. The Credit Summit will be held on Thursday 19 th March and is sponsored by Experian. It will feature nine individ- ual conferences, and the diversity will ensure that there is always something for everyone. If you’re planning to attend the Summit in London, make you stop by Stand 5 to have a chat with our industry experts about our award-winning products.
Above: LendingMetrics hosting an exhibition stand at the 2019 Lending Summit
Our attendees Meet the Business Development team members who will be representing LendingMetrics at the Lending Summit
Hamish MacCormick Business Development Manager
Steve Beard Business Development Manager
Claire Januszczak Partnership Manager
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Metrics Monthly | 09
Creditworthiness and affordability: what exactly is the difference and how can OpenBankVision help companies make better credit decisions? Do you have a crystal ball?
To answer this question, it is first important to understand the differ- ence between creditworthiness and affordability. The FCA classify these as two very separate things. Creditworthiness is defined as a consumer’s ability to make repayments as they fall due (or within
a reasonable period in the case of open-ended credit such as overdrafts or credit cards). However, it’s down to the lender to decide how to check this, and they must make a reasonable assessment based on each individual case. Many companies have focussed on creditworthiness as, unsurprising-
ly, they want to try to ensure that they regain the money they have lent. Affordability, on the other hand, focusses on whether the consumer can actually afford to take out the loan in the long run. But does this mean that the lender needs to be able to see into the consumer’s future?
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February 2020 | UK Edition
Appropriate checks will of course take place to ensure that the consumer is creditworthy: that they don’t have CCJs or IVAs, are not bankrupt and won’t be late with their payments. Nevertheless, this does not guarantee that they can realistically afford the loan. So, how can a lender make a confident decision based on both creditworthiness and affordability? There are two options. The first is to build a system that can see into the future: the creditworthy crystal ball! The second and, let’s face it, much more realistic option is to use as much data as possible to make an informed decision. Affordability has and always will be a hot topic for regulators and lenders. Whilst regulators do not explicitly pre- scribe which checks lenders should and shouldn’t carry out, they do expect that the checks completed are appropriate for both the lender and consumer. This means that there could be errors due to differing interpretations. According to the Financial Ombudsman Service, there has been a 130% increase in consumer complaints relating to claims of mis-selling due to affordabil- ity. This has been a major contributory factor in well-known Payday lending companies such as Wonga, QuickQuid and the Money Shop going into admin- istration. Lenders are having to change their business models accordingly as these complaints are causing issues within their business operations. One emerging problem is insurance: due to the increased amount of complaints, lenders are finding it more and more difficult to get appropriate cover. Either their insurance premiums are becom- ing unaffordable or the insurance poli- cies will not cover the company. Whilst there have been examples of lenders not completing the appropri- ate risk checks on consumers’ applica- tions, there are many companies that are doing it well but still feeling the neg-
ative impact. The question, then, is how do lenders ensure they are using the appropriate amount of data to accu- rately assess affordability alongside creditworthiness? Lenders are increasingly using Open Banking to be able to verify the infor- mation provided by the consumer and gather the required data. Prior to Open Banking, making a decision based on a consumer’s bank statement data was a long, drawn-out process and had an impact on the consumer journey, often resulting in a loss of business for the lender. You may remember the piece in our October issue of Metrics Monthly “Don’t Thomas Cook It”, in which we looked at how the consumer journey can affect businesses, and how time and speed are top of the priority list. The custom- er experience steers their spending habits, and this is one of the potential downfalls that led to the Thomas Cook collapse at the end of last year. But how do lenders find the right balance between ensuring that they are as dil- igent as possible whilst also prevent- ing customers from going elsewhere due to a poor consumer journey? On one hand, lenders will want to keep costs low, but on the other hand they’ll want to provide a fast and convenient process in order to avoid consumers jumping ship, much like they did when Thomas Cook didn’t change with the times or do enough to compete with online sites. This is where OpenBankVision (OBV) from LendingMetrics comes in to its own. We launched the revolutionary Open Banking platform at the start of 2019 with a simple message: “100% free, forever”. This has not and will not change. OBV has enhanced the consumer journeys of many lenders, allowing them to make quick and informed decisions based on facts and evidence. OBV benefits from years of
LendingMetrics experience of categori- sation and consumer spending habits. Whilst we cannot see into the future, the detailed reports produced by OBV ensure that lenders can understand how the consumer manages their money, and thus make better decisions based on affordability as well as cred- itworthiness. It allows lenders to see salary income, expenditure, dispos- able income, and more, all in real time. This helps lenders to understand if the consumer can afford the loan and how they will afford to pay it back. Our clients have given excellent feed- back on our OBV platform, especial- ly regarding the impact it has had on their businesses. Lenders have been able to increase their diligence and speed up their origination process, with some reducing their decision times from a number of days to a number of seconds. OBV can be used as a standalone or integrated platform and almost all LendingMetrics’ Auto Deci- sion Platform clients are using OBV as part of their automated processes. There may be no such thing as a cred- itworthy crystal ball, but OBV can trans- form the way you assess a consumer’s affordability, and help you make better, more informed lending decisions. Oh, and did we mention, it’s 100% free, forever!
Above: Head of Operations Paul Brown
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Metrics Monthly | 11
OpenBankVision
Categorised bank statement data View transactions in real-time 100% free, forever
OpenBankVision (OBV) by LendingMetrics is an award-winning and fully categorised bank statement data platform, based on decades of combined experience in the field. Our OBV platform provides categorised bank statement data, absolutely free, with no limits and no contractual minimums.
FOUR OBV DATA OPTIONS:
Fresh The fully consumer journey and authentication process
Refresh Receive updated bank statement data for up to 90 days
Gather Access real-time fresh consumer data using ‘token sharing’
Snapshot The ability to instantly request bank statement data
BOOK A DEMO TODAY www.lendingmetrics.com
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Lancaster Court, 8 Barnes Wallis Road, Fareham, Hampshire PO15 5TU
+44 (0) 2394 211010 info@lendingmetrics.com
Make better decisions Find out how OpenBankVision can help you make better lending decisions by watching our video below!
Frequently Asked Questions What can OBV do? OpenBankVision provides fully categorised bank statement data, in real-time. It can confirm salary to bank account, and produces reports that allow you to analyse your cus- tomers’ spending habits. Using OBV, you can see first-hand what the customer earns and spends, and spot problems such as troublesome gambling habits. Is OBV really free? Yes, our standalone OBV platform is 100% free, forever. This includes no limits and no contractual minimums. We also offer premium products and services in addition, to help you make the most of the bank statement data.
Can I customise the customer journey? Absolutely. Alongside our standalone version, we also offer an integrated option that is fully customisable to your branding. This means your consumer journey will be as smooth as possible. Can OBV predict the future? Unfortunately not, but it can allow you to analyse your cus- tomers’ spending habits and flag up any recurring problem spending. The award-winning platform comes with a decade of Credit Risk decisioning experience, which means we know how to provide the right bank transaction data.
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