Lending, it’s been said, is as much art as science – and even in the 21st century, it is filled with friction. But with advanced technologies in the mix, and with the cooperation between lenders and borrowers enriched by data, the process becomes far more positive for lenders and borrowers.
Lisa Kimball, senior vice president of product and strategic partnerships at Finicity, a Mastercard company, told PYMNTS that open banking would streamline loan servicing and make it more customer friendly.
The conversation came against a backdrop where data shows that 61% of financial firms are interested in leveraging technology to improve openness and data sharing for payment modernization. And while Kimball said loan servicing might not represent “a new use case for open data sharing,” she emphasized that it’s continuing to mature as financial institutions move toward full digitization.
Institutions that leverage open banking technology in the process can minimize risk, reduce friction and speed up their services to consumers and businesses alike. That move toward greater efficiencies comes as end-users grant account permission during underwriting, which then can be used to expedite repayment, too.
From Onboarding to Repayment
“Think about this as someone providing income verification, to qualify for a loan, and then being able to connect those same accounts for repayment without having to follow a secondary separate flow,” noted Kimball. “So [open banking] truly streamlines the experience for end-users while keeping them in absolute control of how their data is being used.”
The end-consumers grant the permission, said Kimball. At the same time, servicers gain additional insight into the health of their portfolio, as well as an opportunity to reward the best borrowers.
Throughout the process — starting at onboarding — open banking platforms can create a great borrower experience, she said.
She offered the example where a consumer can utilize accounts that have already been validated (possibly even for a use case other than borrowing) and opt to tie repayments from those accounts with a click. Open banking can also help to end some of the clunkier processes inherent in lending, such as micro deposits, which can take days to settle. Gone, too, (and thankfully so) are the days when customers had to hand over voided checks to set up ACH payments.
“With open banking tools,” she said, “we can validate, connect and permission account-to-account payments in minutes.” For lenders, the tools make it possible to process payments in real time — and even offer users alternative payment options.
“Open banking solutions in this space really provide a lot of confidence about the safety and validation that exist with these authenticated accounts,” she said.
Of course, data remains the glue and that ties the workflows, account openings and permissioning together. Companies including Finicity, she said, can get accurate details about the current account owner, adding another layer of security throughout the financial services ecosystem.
Looking ahead, she said, lending is evolving rapidly. Regulations will continue to evolve, too, where the U.S. has traditionally been more market-driven than other regions and countries when it comes to open banking.
As she told PYMNTS, “We’ll continue to see consumers and borrowers demanding experiences that look like experiences that they have in other facets of their life: ‘It’s easy. I can do it from where I am and when I feel like it, and there’s a very streamlined way for me to transact across a smooth easy-to-understand experience.’”
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