Open Banking promises faster and more convenient ways to control and share our financial data to help us make informed choices and access more benefits, yet a YouGov poll of August 2018 found that 72% of adults had never heard of Open Banking. Like the unfamiliarity and security fears that once existed around online shopping or contactless payments, it’s a fair bet to predict Open Banking will find a place in everyday transactions.
But will it play a part in collections?
The Open Banking (OB) Organisation sets out a number of criteria for success that are relevant to its application in debt collection operations. Open Banking products and services must enable:
- Informed decision making: customer journeys must be intuitive and information must be easily assimilated in order to ensure informed customer decision making.
- Simple and easy navigation: there must be no unnecessary steps, delays or friction.
- Familiarity and trust: the customer must only need to use the login credentials provided by the account provider.
What could be gained?
As many customer’s financial data is scattered across multiple sources and as direct debit and paperless billing reduce the data easily at hand, agents are navigating a more complex landscape as they determine the best course of action for each individual. In practice, income and expenditure assessment is a time consuming and often stressful part of resolving arrears that could easily be improved by the integration of Open Banking into a digital-first process.
Sounds logical but…
People often have only a vague picture of their financial situation, perhaps that’s for a good reason- they may be JAMS and don’t want to be reminded of how precarious their finances are or how reliant on credit they have become. There is also mistrust about allowing a creditor to access a bank account. There are concerns about what data might be taken and stored, about what conclusions might be drawn from it and how that might affect access to credit or credit scores. Some people worry a creditor could end up permanently watching their spending. Open Banking and lenders have a real task on their hands to make the rules clear and reassure the public that their data is safe.
So, who is interested?
For those customers who do want to take control, Open Banking offers a quick and accurate way to see the bigger picture. Despite all the concerns mentioned above, there is a value exchange that will become clearer and more attractive as education, publicity and familiarity play their part. Reassurances about what level of detail a creditor will see are essential.
Debt advice bodies are getting behind Open Banking for Good and will be a critically important voice in the acceptance of OB among debtors. If collections operations proactively mirror that collaborative ethic and value exchange, easier income and expenditure assessment could be on the cards to the benefit of customers and creditors. It could also become a regular part of existing customer care in the form of optional periodic checks on affordability to make sure each customer is in control of their debt and are on best repayment arrangement throughout their agreement.
Will it be worth it?
Collections integration with Open Banking will offer a route to a quick and easy, verified affordability assessment which while not compulsory, can become part of the range of options for customers that make life a little easier. Open Banking For Good urges organisations to ‘create and scale solutions that will improve financial capability in the UK’. It’s up to collections organisations to grab the opportunity and make repaying arrears to their organisation easier and quicker.
“If there are too many steps involved in achieving an outcome with a particular organisation, given that people have multiple debts.. a competitor may make it easier for them and they’ll get the return on the collection”