Whether you are working in the financial services or in the real estate sector, chances are that you have heard about Open Banking. But you may wonder why is everyone talking about it, and what is the true power of this new technology? In this short article, we will discuss how implementing Open Banking at the core of your tenant reference checks can make a difference and what opportunities can arise from it.
Open banking is a government scheme that entered into force in 2016, with the purpose to provide a secure way for customers to share electronically their financial data to a third party. By using a dedicated platform, customers are able to connect and select the bank account for which they want to share their transaction data.
This means that instead of receiving copies of bank statements containing transactions, letting agents can now access tenants banking summary electronically. Making it possible to automate analysis and rent affordability calculations.
You may wonder if this is really safe for your tenants? The answer is yes. It is probably one of the safest online banking practice, and thus for three reasons:
The traditional process is time consuming for all the parties involved during the letting process. As we mentioned above Open Banking speeds up the referencing process by automating a significant part of the existing procedure. Receiving a digital copy of the tenant’s transactions allows us to perform income verification as well as a thorough analysis of the tenant’s financial liabilities and understand what his/her’s real affordability is. Reinsuring both the letting agent and the landlord.
With Open Banking the tenants can skip the tedious process of providing all the documents needed and can get an almost instantaneous answer on whether or not they are accepted.
Finally, the automated work limits the human errors, so agents and landlords know they have accurate information. Significantly reducing the back office and operational costs associated with existing traditional processes.
With over 7 million users in the UK in 2023, there is no doubt that the Open Banking technology is propelling its own adoption. While it is already a common practice to employ it for tenant referencing, we anticipate the emergence of new innovations for pre-qualification checks. As it will allow letting agents to ensure that tenants can rent specific properties, leading to better property matches. Open Banking will also play a pivotal role in facilitating easier rent payments in the future.
