In early February 2021, Equifax acquired transaction data analytics company AccountScore Holdings in a bid to bolster its open banking capabilities. Here Emma Steeley, the CEO of Equifax’s AccountScore, considers how it’s using the technology to streamline sales and customer services with lessons from one of the motor finance sector’s first live use cases.

The motor finance sector is experiencing an irreversible digital shift, as open banking, a new technological and regulatory framework that transforms how customers check their viability for credit and streamlines how they then apply for and receive it, is raising customer expectations and raising the bar for every player in this space.

When it arrived in 2018, the case for open banking was fairly straightforward. Consumers are the rightful owners of their financial data and should be allowed to share it with whoever they want. The primary case was to encourage competition in the retail banking sector, but four years of innovation later and the applications have spread far beyond those initial intentions.

We believe Equifax was the first to bring open banking to the motor finance sector, and we now work with a wide number of companies in this space, helping them to use this free-flowing financial information to speed up the time it takes to check a customer’s creditworthiness while increasing the overall number of people that motor finance providers can confidently say yes to. Over the past 18 months we’ve seen a 300% increase in the adoption of open banking technology in motor finance, and as customer expectations are reset, providers who do not adapt risk lagging behind.

When I speak to finance providers, there are two challenges that usually form a large part of those conversations. The first is the amount of time and resources required to provide customer support, and the second is the quality and effectiveness of that support when customers fall into arrears on their loan. Both can take up a huge amount of employee time, and when things go wrong it can damage a brand’s reputation and lead to negative reviews that are hard to shift. Open Banking helps overcome those challenges, by allowing lenders to build a 360 perspective of a consumer’s financial life in a matter of moments, so time can be spent on finding the right solution.

To give a recent example, Equifax has worked with PSA Finance (Peugeot, Citroën & DS Finance & Insurance) to tackle this very challenge. In what was one of the first live use cases of open banking technology in a creditor collections process, PSA’s finance customers could use the technology to easily share information that was paramount to determining the best treatment path and helped set up a manageable and affordable repayment plan with the customer based on their individual circumstances.

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By helping PSA Finance remove manual processes and improve the assessment procedure of its customers, the company noticed a 12% increase in the number of repayment arrangements, all of which were then maintained using Open Banking financial health insights for close ongoing management.

Important as those improvements have been, the big wins to the credit lending process are the radical changes to affordability checks, decision-making on credit risk, and assessment times. The recent ‘digital future of finance and credit risk’ report revealed that access to open banking data has resulted in a 20% uplift in automated income verification rates, and a 50% reduction in the length of calls to assess income and expenditure. Indeed, improved credit risk decision-making as a result of better data insight is ranked as the top benefit of open banking adoption amongst lenders, and when applying this to the motor finance industry we can see an improvement in both the lender and customer experience, as processes are continually streamlined.

Beyond digital adoption, consumers’ needs have also changed. Our research has found that several new customer profiles have become more prominent over the past 18 months. These include: people in debt that need support getting out of it; savers who need to know where to invest and save; and consumers prompted to borrow by the ability to save during the pandemic. With the data from open banking, lenders are able to offer better insight-driven solutions to improve the customer experience. And consumers feel the benefit too; 75% of loan applicants will now choose open banking over other methods to share data for affordability.

This is undoubtedly a crucial part of the credit industry’s future, and we should be encouraging and investing in development at every turn. At a time when supply chain challenges are making finding and acquiring a vehicle harder for consumers than at any time in recent history, the ability to move quickly and maintain loyalty is paramount. This is the edge that I believe open banking can bring to the sector, and it won’t be long before it comes as standard with every model out on the road.

2021 in review: views from across the industry