What is Open Banking?

Open Banking is a term used to describe a set of technologies and standards which allow customers to securely share their financial data. It's a system that is backed by the UK government and endorsed by governments around the world and essentially helps you gain control over who can view your financial history. When using open banking, the referencing process used for verification becomes far quicker and more accurate.

Is Open Banking secure?

Security is key with Open Banking. Your bank’s login and password details are never requested. Only apps and websites regulated by the Financial Conduct Authority (FCA) can enrol in Open Banking, and the bank is financially responsible if any fraudulent transactions take place. In addition, data protection laws -such as GDPR - are also integrated within Open Banking.

The scope of Open Banking covers retail accounts: everything from your average Joe’s account all the way to SMEs.

How does Open Banking work?

This technology is able to assess peoples financial data, but also let third-party businesses access this data.

Open Banking gives consumers power and control over their data. They alone have the right to go ahead and share their data and decide how long to keep the connection flowing to the business.

These data insights result in more customer focused and customer-lead products that then fuels business growth. As a business, it would look something like this:

Business: Join the Open Banking ecosystem and partner up with the technology provider with an API that integrates with their product.

The customer: Connects to their bank using their website.

Business: Get access to the consumer’s financial transactions and can analyse this data to fit the consumers’ needs.

The customer: Is free to end the connection at any time.

How does open banking tenant referencing tie into the rental market?

Open Banking has transformed the way in which you can review prospective tenants - no more waiting for bank statements or proof that rent in a previous property was paid on time.

The documents that have been asked for, for decades are becoming obsolete. And if we truly look at this way of referencing a tenant, and subsequently qualifying them, were we really doing it right?

Open Banking referencing allows for a faster and more secure way of analysing the data that you would previously request in the form of physical or digital documents. And with the technology expanding to other markets, it means that international tenants can apply for properties in the UK and can be screened swiftly and confidently.

In addition, Open Banking is the safest option, not only for tenants, but especially for letting agencies and landlords. With instances of fraud increasing in the rental market, Open Banking helps prevent financial loss due to fraudulent activity. This is because Open Banking provides agencies with foolproof data coming straight from the bank, no more forged documents or word-of-mouth referencing.

How does Open Baking fit into the Homeppl tenant checking process specifically?

Once invited to complete a Homeppl check, you will be able to click a link to connect to open banking and connect your bank account.

After this, your data will be safely sent to our system. We'll then review that data and use it to confirm the financial aspects of your application.

Can tenants benefit from open banking in the rental market?

Open Banking is no longer the future, it is here and it’s revolutionising the way we do business now. The initial 9 banks to first implement Open Banking are expanding this technology. The number of users and transactions being shared is only increasing. There are also big advantages that Open Banking can provide to renters which is related to credit scoring. Traditionally, in the property space, only mortgage payments would count towards your credit score, not rent. But with the rental market booming and the advance of technology a tenant can now use their rental payments to improve or even generate credit scores.

What’s next for Open Banking in the UK?

Open Banking is already well established within the UK and is spreading globally. The implementation in the UK was considered a success and paved a new way of doing business in Europe, North America, Australia, New Zealand, Singapore, Japan, and South Africa to name just a few.

The initial scope was limited to account, transaction, reference data and the ability to initiate payments. Now, Open Banking is looking at how many more accounts, how much more information, how many more areas could fall into its scope and allow customers to share a wider range of their financial data.

So, Open Banking and its revolutionary technology has paved the way to a new idea - Open Finance. This concept would go beyond Open Banking and its limitations which means taking the leap towards insurance, pension, mortgage and investment industries. Open Finance will build on the concept of Open Banking by allowing access and to customers’ data concerning even more financial products and services. Open Finance can be thought of as the next step on the Open Banking journey.

Our take on open banking

Open Banking is fast and secure. It is a highly regulated ecosystem that is only expanding in scope. We have seen how the rental market has been successfully impacted by this technology. In fact, it plays a unique role in our own fraud detection solution.

Seeing these benefits transfer to the insurance and mortgage industries makes us incredibly excited for the next few years. With the possibilities of Open Banking and how it has changed the way we now rent properties, not implementing it means you’ll be left behind.

It most certainly has it's unique benefits when truly assessing the finacial validity of a potential tenant. Open banking helps us:

1. Reduce forging and fraud - data shared by the bank, and not by the consumer

2. Provide a detailed view about the user’s continuous income information for up to 3 years

3. Monitor the user’s income for at least 3 months  

4. Create a seamless and secure user experience

5.  Automate income validation

6. Avoid income validation dependency on third party reference