Open Banking has quickly become a global phenomenon over recent years, and with many people turning to digital banking as a result of the pandemic, this trend is only set to continue.
In fact, the number of people opting to share their data through Open Banking has tripled since the inception of the coronavirus pandemic, with data sharing requests rising from 47 million in February 2020 to 188 million in February 2021, according to Experian statistics.
Similarly, 57% of lenders adopted Open Banking technology in the last 12 months, helping people to manage their finances in more fluid and intuitive ways online.
But what is Open Banking?
Originally set up by the Competition and Markets Authority (CMA) in 2018, Open Banking is a platform that provides businesses and consumers with access to a wider choice of innovative products, giving them a better understanding of their finances through technology.
Since its success in the mortgage market, Open Banking is also beginning to impact the lettings industry, allowing tenants to access a more streamlined referencing process and enabling agents to use online banking without having to manually process payments every day.
With Open Banking providing users with a secure way for software suppliers to access their financial information, it has the potential to transform the payments process in the rental market in a major way.
Below, we outline three ways Open Banking can revolutionise the rental market, helping to create a seamless process for letting agents, landlords and tenants.
Currently, there are around 15 million renters in the UK who move every 12-18 months and each time they move, they need to secure a new reference – which can be seen as invasive, stressful and time-consuming.
But Open Banking mitigates the stresses of tenant referencing, helping to bypass the need for phone calls, faxes or tedious reference checks.
Tenants can now connect the platform to their online bank accounts, granting it access to a host of crucial screening information and sharing this data within minutes.
For agents and landlords, Open Banking enables automated payments and real-time payment management as well as a quicker and more streamlined referencing process.
Open Banking uses application programming interfaces (APIs) to deliver fast and highly secure data transfer.
Unlike the screen scraping method, which depends on tenants sharing their login details with an app, APIs allow users to regulate the data they share, with who and for how long without ever sharing password information.
This transfer of data can only be authorised by the user and cannot happen without their consent, making the security of the fintech on the same transaction level as the bank.
For a third-party provider to access Open Banking APIs, they must:
- Be FCA (Financial Conduct Authority) authorised
- Redirect users to their personal or business account for online banking login and never ask for a password
With Open Banking, the ownership of financial data is returned to the tenant, allowing them to give third parties like budget and payment apps permission to plug into their online banking accounts.
From an agent and landlord standpoint, this provides a more accurate view of a tenant’s affordability.
Eliminating the strenuous tenant referencing process also brings huge improvements to the rental application and management process, making it a quicker and smoother experience for all parties.
At Canopy, we offer free, instant Experian and Open Banking data-based referencing to letting agents and landlords, guaranteeing a transparent process for the beginning, middle and end of a tenancy.
The future of the PRS and Open Banking
It’s clear that Open Banking is on course to dramatically improve the referencing and payment process for letting agents, landlords and tenants by eradicating the historical barriers to accessing and sharing financial data.
As the private rented sector (PRS) continues to expand, the need for this kind of accounting and record keeping is only going to grow. That said, adoption of Open Banking in the lettings sector still has a way to go.
Visionary technologies such as our RentPassport can offer tenants a portable, digital rental identity, helping to better understand their finances and improve their credit score.
For agencies, using services via Open Banking will allow them to provide a more efficient service to customers and let properties quicker, helping them to stay competitive in a busy market.
It’s expected that we will see more FCA-regulated providers in the next few years, helping to propel PropTech and Open Banking in the rental market and connect the disparate strands of the rental journey.
Here at Canopy, we use smart technology to simplify the rental process so you can say goodbye to waiting to hear back from your referencing company and hello to things like a free digital rental profile in the form of our RentPassport and RentTracking services.
For more information, please contact us on: 020 3966 3850 or email us at firstname.lastname@example.org.