Nearly nine in ten lenders - 87 per cent - plan to adopt Open Banking within the next two years, according to a report from Credit Kudos.
The credit reference agency found that by 2023 seven in ten lenders are expected to be using Open Banking overall.
One in four lenders - 26 per cent - are currently using Open Banking technology according to the report, with 51 per cent of those who haven’t yet used the technology planning to do so in the future.
The company’s report also covered how the pandemic affected lenders’ ability to operate as usual.
Eight in ten - 78 per cent - of lenders changed their rules about who they could lend to in the pandemic according to the report.
Almost half - 46 per cent - of these lenders changed their policies because it was too difficult to verify borrowers’ income, for reasons including furlough and redundancies.
In addition, the report found 34 per cent of lenders that changed their lending during the pandemic now recognise the need to adopt new technologies across their business, and 30 percent recognised an increased need for new data sources.
Almost half - 47 per cent - of lenders said Open Banking could help them save time and cut the cost of credit decisioning according to the report.
“Covid-19 caused a lot of worry across both the consumer and SME lending sectors, and many lenders went into survival mode, increasing credit score cut offs and pulling higher risk product ranges,” said Stuart Mogg, associate partner, corporate finance, at EY. “Thanks to various factors, including government schemes, increased vaccine roll-out, and the return of consumer confidence, both the consumer and SME lending sector have nearly returned to pre-pandemic norms and in some cases have pushed risk beyond these levels.
“But stability has not lasted long – already we’re seeing further COVID-19 and geopolitical volatility, and it is my view that we should not expect any less of a challenge during 2022 then we did in 2021.”
He added: “Periods of volatility such as this is when Open Banking insights become even more valuable for lenders, going beyond traditional credit bureau data to give a real-time feel of consumer and SME behaviours.”
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