Aug 2018 | Credit Decisions
By Posted by Jon Roughley

From the GDPR to Open Banking, the PSD2 to the FCA’s new emphasis on affordability, regulators and government have led a systemic shift towards empowering the customer. Today it is customers, not organisations, who are the true data owners. As an industry we have always had the responsibility to use that data appropriately and put the customers’ best interests first.

The open banking proposition is built around the customer. It means an individual will be able to access better products and services, receive more appropriate, personalised products and offers, and easily switch between suppliers to find the best deal. And from a lender’s perspective the more data available, the better placed to decide on a customer’s creditworthiness, or on what products and services best suit their individual needs.

Of course, open banking relies on consent. Without the customer’s express permission, their bank account data remains private to anyone outside of the holding bank. It’s up to organisations to find better ways to communicate with customers about the value that sharing their data will bring, including how you intend to use it, how you can use and control it in the way they’re most comfortable with.

Businesses today need to foster an environment of trust and transparency, which will improve an individual’s willingness to share more data. An example scenario is during a credit application; a customer shares their data to gain access to financial products and services that are right for them. If this process isn’t applied appropriately, the whole open banking ecosystem will fail and the opportunities it represents, to the entire sector, will be lost.

Customers need to be given the choice, and enough information to make a decision. This needs to be transparent to gain the customers trust. Still, even when lenders take steps to inform and support customers on the journey, some people will not want to share their transactional data. In those cases, lenders need to consider using alternative data sources to support their decision without being intrusive.

The value exchange

Trust is a big part of helping to gain consent; transparency is another.

People are looking for value in terms of convenience, better products and better service. Organisations are seeking value via more engaged customers, lower costs and reduced business risk. For both parties to be feel satisfied there must be a fair exchange.

At the same time, you need to consider how people’s attitudes to data sharing are different. We produced a report recently where varying attitudes are seen. Some will share, some will not. Some need more convincing, some need more instant benefit. It is all about proximity to purchase, receiving instant value. This is vital, making sure the individual can evidence how it will help them, through what it will bring or enable them with.

At Experian, we’ve developed tools to help lenders build engagement and trust in open banking. For example, a dashboard which continually analyses the customer’s transactional behaviour to give personalised advice on new services or offers. Or warn the customer they are about to go into arrears or financial difficulty.

“By understanding a person you can help them with better suited products or services, perhaps even before, they know they’re needed.”

 Building trust

Our extensive research into consumer attitudes to data sharing showed that customers will be more willing to share their data if you put them at the heart of your strategy and always stay mindful of and attentive to their needs. Here are eight steps you can take now to build trust and demonstrate you’re putting customers’ needs first.

  1. Be explicit about what data will be used and how. Explain how sharing this data will benefit both parties.
  2. Keep language easy to understand and avoid unnecessary complexity. Unfamiliar and inaccessible terminology can make people suspicious of underhand practices.
  3. Don’t overstep the mark. Ask for the information you need, and no more.
  4. Acknowledge the sensitivity of the information you’re asking for and be aware of how customers might perceive your request.
  5. Reassure customers about your information security and usage.
  6. Allow customers to decide what they will and won’t share. Offer them choices, rather than trying to control them.
  7. Make it known which regulatory bodies your business is accountable to.
  8. Guide them to how they can opt out and explain everything to them clearly and helpfully.
  9. Ensure you are working with trusted parties. The supply chain you create is essential. Working with trusted providers will be crucial to ensure every step of the journey is reflective of your needs; trusted and effective
  10. Deliver on your promise, if you offer a 5 minute pay out for a loan, you need to be sure that you can deliver this. Prequalification will help here, but also the ability to understand huge and varying data sources to automate a decision will be helpful.

The most important thing is that the customer sits in the centre of this new data-driven world. We need to focus on the wellbeing of our customers, gain their trust and minimise the risks. Businesses that can do that successfully will build enduring and profitable relationships with their customers.