Would you like to save time on credit applications and get fairer, more accurate borrowing options as a result?
If you’ve ever applied for finance or borrowing of any sort, you’ll know that you need to provide a lot of information about yourself and your circumstances before you can see your options. And even then, there’s always the worry that you’re not providing what the lenders want to see.
But what if there was a simple, secure way to share detailed account information directly with lenders, so that they can see the full picture and present you with more accurate offers with a higher likelihood of eligibility?
Open Banking is a revolutionary new way to safely share information relating to your bank account with trusted parties, which can help you to get a more accurate range of borrowing options when looking for a loan.
In this guide, we’ll demystify what Open Banking is and explain how we can all benefit from it when looking to borrow.
What is Open Banking?
In a nutshell, Open Banking allows you to temporarily share information about your finances that only you and your bank can normally see.
The idea behind Open Banking systems is that, by allowing third parties to view your account data, they can get a much clearer picture of your habits and circumstances. As a result, they’ll be able to tailor what they offer much more closely to what makes sense for your financial situation.
While the idea of sharing private information about your finances might seem scary at first, it’s worth noting that using Open Banking is safe, secure and regulated by the Financial Conduct Authority (FCA).
Open Banking examples
So, we’ve covered what Open Banking means in principle, but what does that look like for people’s everyday finance needs? Here are a few examples of the ways that Open Banking can have an impact on your personal finance management.
Apply for credit faster
Nobody likes filling out a long form with endless, detailed criteria that you need to dig out from your records or old statements. With Open Banking enabled, you’ll be able to automatically share a lot of the data you’d otherwise have to enter manually.
So not only will it be quicker, but you might have saved your sanity in the process too.
Enhancing your finance application
Not only does Open Banking speed up the process of applying, it can also improve your chances of finding eligible finance options too.
For example, when you agree to Open Banking with Aro, you provide temporary read-only access for our technology to view your recent digital bank statements . As a result, we’re able to automatically and accurately show you which lenders you’ll be most likely to be approved by, giving you more confidence when you decide to formally submit an application.
See all of your accounts in one place
Open Banking can be used in different ways between platforms. In some cases, you might be able to link your bank account with another application, like a money management app, and view the balance of all your accounts in one place.
View finance product options in third-party apps
With Open Banking technology, you might also be able to see eligible product offers from third-party providers of financial services while browsing your favourite shopping or money management apps.
This is different to the way Open Banking is used here at Aro, but it’s worth keeping in mind just how broadly the applications of this technology stretch.
What problems does Open Banking solve?
At its core, Open Banking provides efficiency and convenience to everyday life—it’s making personal finance more accessible for all of us.
For customers, Open Banking provides more convenient ways to spend, borrow, and invest.
While for the businesses offering financial services, Open Banking provides access to richer information about their customers, allowing for more tailored products. In other words, Open Banking allows businesses to offer products that are more tailored to suit your needs.
All of this together makes Open Banking brilliant for financial inclusion. For instance, it could particularly help someone with a thin credit file—because they’ve lived abroad, or never needed to borrow money—who can afford to take out finance, but would be declined by traditional credit checking.
In other words, open finance makes borrowing more convenient and more accessible for those that might have difficulty getting approved with a traditional credit application.
How does Open Banking work?
When you make an application for a loan, or provide details to check your eligibility through our online portal, you’ll soon have the option to add digital bank statements.
By doing this, you’ll be prompted to connect your bank account and asked to provide read-only consent for your bank statements to be viewable. It’s safe, secure, and the access can be revoked at any time.
Traditionally, your eligibility to borrow comes down to your credit score, which can be immensely frustrating for those that can afford to borrow but haven’t currently got a strong credit rating.
With Open Banking enabled and access to digital bank statements granted during our eligibility check, we can now include affordability assessment as part of our eligibility check.
This means that we’re able to suggest borrowing options that may have previously been unavailable to you, were it not for Open Banking providing a more complete picture. We can also remove any options you would have been declined for at a later stage based on the lender’s affordability checks—making sure you don’t waste time on offers that aren’t right for you.
Is Open Banking safe?
Yes, using Open Banking is safe, secure, and regulated by the Financial Conduct Authority (FCA).
Here at Aro, we’ll only have read-only access to your digital bank statement, meaning we won’t be able to move or affect your money in any way.
For the best possible results, you should link to the bank account that your income is paid into.
Most banks are Open Banking enabled, however some currently don’t have it set up. If this is the case for you, you can add a different bank account or continue with your finance search without adding a digital bank statement.
Evolution of Open Banking: What’s next?
For the first few years after it was set up by the Competition and Markets Authority (CMA), the initial uptake for Open Banking was slow.
But we’re now seeing it become more commonly supported by loan and finance providers, and it’s already benefiting customers as a result.
Over the next few years, we can expect to see the adoption of Open Banking amongst UK financial service providers to grow.
So what does this mean for you? It means more freedom, more flexibility, and a more accurate view when applying for loans, credit, or finance.
And with Open Banking already making up a core part of our offering, we’re here to help you find the right borrowing option for your needs–both today and in the years to come.
Start benefiting from Open Banking today
Are you ready to enhance your application and start benefiting from fairer, faster, and more accurate borrowing options?
To get started with Open Banking, simply head over to our free tool to check your eligibility and select the option to “Add digital bank statements”. From here, you’ll be guided through the remaining steps and can start exploring your options, safely and always with complete control over your personal data.Still unsure? You can read more about Open Banking in our additional guide: Would I benefit from using Open Banking?