“Will this borrower be able to pay the money back?” That question has long weighed on lenders, determining who gets approved for a loan. Historically, this has required borrowers to supply a variety of financial and physical documents, from bank statements to proof of income and identity. However, technology is rewriting these processes, and Open Banking is leading the charge, creating a streamlined, efficient, and secure system that benefits both lenders and borrowers.
In April 2024, Bluestone Mortgages surveyed 2,000 UK adults to understand the public’s perception of Open Banking. The findings are eye-opening! While Open Banking promises faster loan approvals and more personalised financial products, awareness and trust lag significantly among consumers. With over 61% of the UK population unaware of this innovation, the industry has a great opportunity to address this and educate consumers.
In this blog post, we’ll cover:
Open Banking is a financial technology that enables the secure sharing of customer financial data between banks and authorised third parties. With 8 million active users in the UK, Open Banking is streamlining traditional processes by providing lenders with direct insights into a borrower’s financial behaviour. By accessing data directly from the source, lenders can make more informed decisions swiftly, reducing paperwork and creating a more transparent loan application process.
While Open Banking is transforming how lenders assess borrowers, many people remain unaware of its benefits, potentially missing out on faster, more efficient mortgage approvals. Our report highlights key insights into public perception of Open Banking:
These findings underline the importance of building consumer confidence in the technology driving the next generation of mortgage approvals. In the age of Consumer Duty, which emphasises the importance of consumer understanding, it is crucial that people fully grasp the terms of agreements they enter into—especially vulnerable groups. When an applicant requires quick access to funds, they may feel pressured to accept terms that are not in their best interest. Our full report offers a detailed look at public perception, privacy concerns, and the steps needed to build trust and understanding. Access the full report here.
With today’s fast-paced housing market, lenders like us are constantly seeking ways to improve a borrower’s experience. Open Banking, with its real-time access to a client’s financial data (with their consent), offers the potential to transform mortgage processing. No longer bound by lengthy document submissions, brokers can instantly give lenders access to a client’s financial profile, saving time and reducing errors. Despite its convenience, security remains a critical concern, as we found in our latest report. According to the survey, 31% of respondents cited privacy as a reason for distrusting Open Banking, and 20% were unwilling to share their financial information with a lender online. These findings underscore a prevalent lack of trust, especially given the sensitivity of the data involved. Clearly, more work is required to educate borrowers about the data security controls that are built into the open banking system.
Open Banking has been designed with strict regulatory standards and encryption methods. UK regulations require that any third party involved in Open Banking be authorised by the Financial Conduct Authority (FCA), ensuring a high level of security and consumer protection. Some of the borrowers will struggle with adapting to new technological environments and may be slow to warm up to Open Banking because of its novelty. There will be a learning curve before Open Banking becomes the standard. However, educating customers on these protections is essential to building the trust needed for widespread adoption.
Open Banking offers enormous potential for revolutionising the lending industry. Findings from our recent survey show that while some borrowers may be initially hesitant, many are open to learning more. Nearly half (48%) of respondents expressed a willingness to use Open Banking for data sharing when applying for a mortgage, provided they were reassured about security. This openness signals an important opportunity for brokers and lenders to address knowledge gaps and reassure clients about Open Banking’s benefits and security measures. By collectively working to demystify the technology, Open Banking could soon become the go-to choice for clients, providing not only speed and transparency but also peace of mind throughout the mortgage journey.
As the mortgage industry embraces digital transformation, brokers who adopt Open Banking are well-placed to remain competitive by delivering faster and more tailored services. By working with borrowers to address their individual needs and privacy concerns, brokers can create a trusting, supportive environment that helps clients see the benefits of Open Banking. While the learning curve may be steep for some clients—especially those less familiar with digital innovations—the Financial Conduct Authority’s (FCA) authorisation and the advanced encryption standards used in Open Banking offer strong reassurance, ensuring borrowers that their data is managed with the highest standards of security and confidentiality.
If you would like to learn more about how we use Open Banking at Bluestone, you can find more information about it here.
Open Banking is set to redefine traditional lending by offering secure, efficient, and highly personalised mortgage solutions. As the technology becomes more widespread, brokers and lenders have an important role to play—not only as service providers but as educators and advocates for a more transparent, client-centred mortgage experience. Our latest Bluestone Mortgages report highlights the need for increasing awareness and building trust across the industry, particularly as financial interactions shift more heavily towards digital channels. Those brokers and who embrace Open Banking early are well-positioned to lead the way, providing clients with a streamlined, safe, and responsive service.
For those looking to stay ahead in this evolving landscape, understanding the full potential of Open Banking is essential. The insights our latest report offer a comprehensive look at Open Banking’s impact on mortgage lending, detailing borrowers’ perceptions and the steps needed to drive adoption. In a world that’s increasingly digital, Open Banking is poised to be a transformative force, making the mortgage process quicker, more transparent, and more accessible for both clients and professionals alike. For the latest insights and a deeper understanding of Open Banking’s role in the future of lending, access our full report here.
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