Brits dissatisfied with services offered by traditional banks are being lured into the world of open finance in increasing numbers.
During the pandemic, challenger banks and fintechs tripled their share of the credit card market and grew their personal loan books by 50 per cent according to new data from ClearScore. The research showed that 9.3m UK adults would use open finance to access better credit, improved offers and interest rates with 3.2m people underserved by their current credit options and 3.6m people lacking access to any credit products.
“The lending market has been changed forever by the pandemic” said Andy Sleigh, the chief operating officer of credit score.
“Fintechs and challengers have embraced open finance more readily than their larger competitors, as it allows them to expand their lending footprint, manage risk better and reduce their overheads,” he continued.
According to Sleigh during the pandemic incumbent financial institutions focussed on catering to their existing customer base while Fintechs and challengers were able to behave in a more agile manner, experimenting with new tech.
“we don’t see this trend abating,” said Sleigh. “In fact our own analysis points to increased consumer adoption of open finance which in turn could help challengers to take further market share from the high street banks.”
However, there’s still plenty of opportunity for bank’s to cash in. Open banking could be key to the recovery of the lending market, which is still 30 per cent down compared to pre-pandemic levels. ClearScore data showed that consumers who choose to share their data are typically lower risk than others within the same credit score bands, suggesting lenders can afford to test the use of open finance data with little risk.
Sleigh concluded: “The size of the open finance market is huge and presents lenders with the opportunity to create innovative products that benefit the customer. Those customers are engaged, aware of the benefits and ready to shop around.”