Open Banking: The future of debt collections?

Posted by: Lowell|November 25 2019


Open Banking has been quietly making waves in the financial industry for the last few years, allowing consumers more control and choice when it comes to their finances. Whilst it’s not quite reached general knowledge yet – two-thirds of UK consumers state they have never heard of the Open Banking initiative – studies show that the sector will quadruple its worth in 2022, once the infrastructure has matured. 

It’s been driven by the UK’s Competition and Markets Authority (CMA) to improve choice and access to financial service providers. With the overarching goal to take ownership of account information from the banks and back to the customer, new concepts are emerging to use the technology to help people make money management easier. For the debt collection sector, Open Banking has massive potential.  

Enhanced money management can support customers both in getting out of debt and staying on track in the long term. By giving consent to sharing transactional information with third-party companies, the consumer can better understand what they’re spending and get advice that’s tailored specifically to their individual situation.

There’s an appetite for this change – half of UK adults think that their bank should use financial data to identify problems and offer support. In the debt sector, the technology can play a valuable role in various ways… 

Vulnerability rehabilitation

Open Banking has a valuable role to play with vulnerable customer management, with the potential to transform the way that they are treated and supported through their rehabilitation journey. 

People with mental health problems are three and a half times more likely to be in problem debt, with finance having a direct impact on someone’s emotional wellbeing, which means businesses need to take care when understanding individual situations. Because of the stigma surrounding debt, banks have previously been the only ones to know when someone is struggling with their finances. 

But, with more transparent access to someone’s personal financial situation, Open Banking can allow us to connect the dots between their financial health and their mental health. There are a variety of functions that can help, from creating bespoke budget plans based on actual transaction data to supporting and coaching individuals to manage their money smarter. It can give customer’s the financial freedom to help them get out of debt quicker – which in turn, for clients, means they’ll be a debt-free customer quicker. 

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Changing the income & expenditure journey 

The process for debt collection agents to assess a customer’s income and expenditure is time-consuming and often stressful – the integration of Open Banking to drive this towards a digital solution will make obvious improvements. 

More often than not, financial data is spread across a wide range of sources and it can be a struggle to accurately gather this information. Open Banking can ensure a quicker, more accurate process, avoiding the need to trawl through bills and bank statements that – in a paperless generation – don’t even exist anymore.   

Data gathering & advanced AI learning

Once an agent has collected the income and expenditure data, there is then another lengthy process to accurately predict and understand someone’s affordability ranking or whether they’re severely impacted and require additional support. 

With Open Banking, there’s opportunity to implement advanced AI learning to predict likely triggers for someone about to fall into debt, as well as help put strategies in place to rehabilitate someone currently in debt. 

Enhanced customer experience

As always, the customer should be at the centre of everything your business does. Open banking can provide our end users with a streamlined functionality and put them back in a position of control. For many, finance can become an overwhelming part of their lives that they choose to ignore – especially when they can’t keep up with payments or something happens that impacts their ability to pay.  With the right guidance and straightforward UX, customers will be in a better position to keep on top of their finances and see all of their outgoings in one place. 

Open Banking: The Lowell Way

We know that our customers prefer to contact us via digital channels, therefore an open banking product would give them the opportunity to access their bank accounts directly to automatically complete the I&E. As a result, the process is easier and more user-friendly, plus we’ll be able to better understand an individual’s unique situation with more complete data sets. 

Neil Costello, Lowell’s UK Marketing Director, said: “We are one of the first in our sector to utilise Open Banking within our services, exclusively for our customers. We want to give our customers the financial freedom to support them through their journey to become debt-free, quicker. With a dynamic interface, we’re offering our customers an easy-to-use, digital-first solution, improving their overall experience and reputation of Lowell as an ethical, effective debt collection and recovery solution.” 

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