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Affordability and risk


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Open Banking for affordability: The 4 key components of a successful implementation

On the surface, the case for these projects is simple. If you already handle bank statements to check income then there’s often a huge amount of manual effort that goes into getting, handling and assessing these. The first step is to understand the amount of time it takes in each of these steps. It’s likely that the automation of this with Open Banking will provide a huge operational saving that often ends up being the strongest part of the business case.

Are you looking at Open Banking checks to replace or supplement traditional Credit Reference Agency searches? You’ll be surprised at how many thin-file applicants that would have been refused by CRA can easily afford the credit.

1. Map the process to understand the problem

If you’re looking to implement Open Banking to enhance your affordability checks, you need to have a thorough understanding of your processes to identify problem areas. You need to see where the breaks are, which in turn will give you a full picture of the business case. It’s good to enter this with a hypothesis, but also an open mind and thorough process - I promise you’ll uncover stuff you didn’t expect to find.

From the moment the application starts to the point where it's either approved or rejected, what does that process look like?

A secured finance provider we met recently needed to check the bank statements of nearly half of their applicants. Sending them away to get physical statements, mailing them (yes, snail mail), scanning, printing and manually keying data, each application would take around 2 weeks from first enquiry - tons of opportunity to improve the experience

2. Always remember the user experience

I was recently asked a question about what the adoption rate is for people willing to share their bank details via Open Banking. My response, that it depends entirely on how it’s implemented and the user experience.

Let's remember that you’re asking someone to effectively log in to their online or mobile banking and authorise the sharing of that information. If people are familiar with Open Banking there might be no issue, but for some, this might feel unfamiliar and make them nervous.

Let me give a couple of examples of how the user experience can have a profound impact on take-up:

Explanation: If you send an email to a user asking them to share their bank information with either poor explanation or reams of complex jargon, don’t be surprised if your dropoff is high. Explaining things clearly and in plain English works wonders. In fact, we’ve seen uptake go as far as doubling when clients invest in dedicated explainer content either through a short explainer video or visual carousel to explain the process. In fact, Bud offers the creation of these support assets alongside our technology to ensure success.

Mobile can make it easy: Signing in to online banking portals on desktop takes around a minute. The end-user needs to get their login and password, which although doesn't take forever, requires effort. If they use mobile banking they can authenticate with their normal biometric in about 15 seconds. The simpler the process, the higher adoption you'll see. QR codes can also be a simple mechanic for helping users transition between devices and these are supported by our platform.

3. Be pragmatic - think about your MVP

Time and again I see people try and boil the ocean and deliver their perfect solution in a single release. A ‘Minimum Viable Product’ approach allows you to deliver a win for the business quickly, giving the best possible return for minimum effort and the lowest risk.

For example, the end goal will be tightly integrating your Open Banking affordability analysis into all of your systems and automating with STP (Straight Through Processing). However, depending on how old your systems are, this last-mile plumbing can often be the most labour intensive part of the project.

Bud engineered our solution to be modular and able to operate as a stand-alone as well as integrated. This means you can go live in about 4 weeks and achieve 70% of the benefit for 30% of the effort.

Most cancelled projects come from a loss of inertia. Get the solution live! As soon as the business sees the results they’ll have the confidence to finish the integrations and unlock the last of the value.

4. Get all your executives onboard AND aligned

Using Open Banking to support affordability has huge benefits. However, don’t take for granted that one exec will see, or be interested in, the full picture. These are the areas where great returns can be found:

Operational costs: Removing the need to handle paperwork manually can reduce the cost of applications by around 70%. Probably the COO.

Risk: By automating, you’re also standardising and reducing the risk associated with human error.

Customer Experience: Do you know how many customers you currently lose because of a poor in-application customer experience? It’s probably more than you think. In some cases, we’ve seen time-to-approve cut down from 2 weeks to around an hour.

In an ideal world, executives for one area would have an interest in the benefits delivered in all areas, but it’s not always the case. Bring together the responsible executives for these areas so that the holistic interests of the entire organization are represented.

There’s obviously much more to talk about than I can cover in a short post like this. If you’re looking for compelling data that can help you frame the case for kicking off an affordability project, check out part 2 of this year’s Beyond Open Banking report or grab a summary specifically relating to affordability using the form below. Alternatively, get in touch if you’d like to discuss your project with our team, we’re always happy to talk.

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