For years, lenders have leaned on credit bureau data to automate decisions, ensuring speed and consistency with pre-set policies and risk frameworks. However, open banking introduces a wealth of real-time insights that represent a new frontier in lending automation—one that remains largely untapped.

While many lenders have begun supplementing their decision-making with open banking data, about one-third of Equifax’s clients are fully automating these processes. The rest rely on manual reviews, which can slow decision times and increase the risk of missed opportunities.

In this article, we’ll explore the common challenges lenders face with automating open banking data, strategies to overcome them, and the potential benefits of moving toward full automation.

 

Why some lenders still rely on manual reviews

Despite the advantages, many lenders remain hesitant to automate open banking data due to several key barriers:

1. Lack of Integration

One primary challenge is integrating open banking data seamlessly into existing lending platforms. Many lenders lack the infrastructure or resources to process this data automatically, leaving them dependent on manual reviews. Integrating open banking into existing workflows and ensuring it minimises friction can be a complex task. This is why many lenders start with simpler use cases—like enhanced income verification—before moving to full automation.

2. Data complexity

While open banking data is rich in detail, it can be overwhelming and complex. For many lenders, this is a new data source that requires time to understand fully. Unlike credit bureau data, lenders can’t always fall back on years of experience or retrospective analyses to predict how decisions made with open banking data will perform. Building up an adequate sample size for confidence can take time, which can be a deterrent to quick adoption.

3. Regulatory concerns

Compliance remains a critical consideration for lenders adopting any new technology. While automation offers clear benefits, lenders are still building trust in these systems, especially for complex cases. Organisation need to gain trust in automated processes, due to concerns that they may result in false positives or false negatives. Human judgement often feels safer, providing a layer of protection against potential errors. Lenders must ensure that automated decisions comply with regulatory standards, which requires careful validation of both data sources and decision rules.

 

Overcoming automation challenges

Despite these challenges, there are actionable steps lenders can take to transition towards automated open banking decision-making, which can bring about significant improvements in efficiency and accuracy.

1. Simplifying data complexity

One way to address data complexity is through tools like Equifax’s synthetic data packs, which help organisations better understand transaction data. These packs offer a structured, sample dataset that allows lenders to familiarise themselves with key data properties before moving to live data. By building knowledge in this way, lenders can gain confidence in interpreting and leveraging open banking data.

2. Building trust in technology

Transitioning to automated decision-making often requires a cultural shift. Lenders can ease this by taking a phased approach to automation. Starting with automation as a support tool, rather than a replacement, allows staff to gradually build confidence in the technology. Over time, this gradual adoption can lead to full automation with less resistance and more buy-in from key stakeholders. Many of our clients take an operational champion/challenger approach where they run a small percentage of applications through an automated process to begin with and adjust the percentage split as they gain confidence.

3. Implementing integrated decisioning platforms

Platforms that combine open banking and credit bureau data can provide a comprehensive view of a borrower’s financial profile. This holistic approach allows lenders to make more informed decisions, improving both speed and accuracy. An integrated platform simplifies the process, bringing all data sources together in one place, and offers a more complete risk assessment with minimal manual intervention.

4. Investing in customisable automation tools

Automation tools that allow for customisation can help lenders balance the need for efficiency with the desire for control. Configurable decision rules, risk thresholds, and scoring models enable lenders to align automation with their specific business requirements. This flexibility means lenders can adjust their automation approach to fit unique decisioning criteria, minimising the need for manual assessments while ensuring that critical nuances are considered.

 

How increasing automation can benefit lenders

Automating open banking data offers significant advantages to lenders, from improved efficiency to better compliance and risk management. Here are some of the key benefits:

1. Increased efficiency and higher application volume

Manual reviews limit the number of applications lenders can process, as they’re time-consuming and labour-intensive. Automation can scale application processing by handling more cases in a given time frame. This allows lenders to meet demand, process applications faster, and improve customer experiences. For those still manually reviewing open banking data, the potential for cost savings and operational efficiency is substantial.

2. Improved consistency and reduced bias

Human interpretation can introduce inconsistency and bias, which are less of a concern with automated systems. Automation applies pre-set rules consistently, reducing discrepancies in how data is interpreted. This consistency not only enhances accuracy but also promotes fairer assessments, as every application is judged by the same standards, free from individual biases.

3. Enhanced compliance and reduced risk

The financial industry is highly regulated, and maintaining compliance is essential. Manual processes make it challenging to consistently apply regulations, but automation can embed compliance checks directly into decisioning. Automated systems can flag inconsistencies, ensure adherence to lending regulations, and provide a level of quality control that is difficult to achieve manually. This helps lenders stay compliant while mitigating risks associated with human error.

4. Faster, more accurate decision-making

Open banking data provides real-time insights into a borrower’s financial health, including recent changes that credit bureau data might not capture. By automating the analysis of this data, lenders can quickly assess affordability and reduce the time spent on manual reviews. This not only speeds up decisions but also gives lenders a more accurate view of what a borrower can truly afford.

 

Real-world impact: industry examples

Lenders who have adopted automated decision-making with open banking data are already seeing tangible benefits, for example...

Abound leverages open banking data to approve more borrowers. According to their CEO, Gerald Chappell, for every one applicant declined due to adverse open banking data, six or seven can be approved thanks to these deeper insights. By understanding applicants’ financial situations in greater detail, they’ve been able to widen their lending criteria and serve more customers.

Everyday Loans has improved underwriting efficiency by implementing open banking into their processes, reducing the time required to underwrite a loan by up to 45 minutes per case. This improvement has streamlined their workflows and enhanced customer experience by enabling quicker decisions.

In the case of PSA Finance, automation has helped reduce manual call times in customer support by 12%, enhancing repayment adherence. By automating income and expenditure assessments, PSA Finance has managed to eliminate time-consuming manual processes, freeing up resources to assist more customers.

 

How Equifax can help

Equifax is committed to helping lenders navigate the complexities of automating open banking data. We offer solutions like our Synthetic Data Pack, which provides a structured view of transaction data, helping clients gain confidence before going live with automation.

Our Transaction Data Decisions tool makes it easy to start automating by providing instant policy rule outcomes on credit applications via our user-friendly dashboard. This tool helps underwriting teams make faster decisions, particularly for complex cases with irregular incomes.

For lenders ready to fully automate, our Clear Decisions platform offers a comprehensive solution that combines open banking data with credit bureau insights. This platform allows for real-time data analysis and dynamic decisioning, offering a robust, data-driven approach to consumer lending.

 

Building a future with fully automated lending decisions

As open banking adoption continues to grow, the benefits of automated decision-making will become increasingly clear. Automation not only keeps lenders competitive but also prepares them for a future where data-driven decision-making is the norm.

For high-volume use cases like pre-approval eligibility, ingesting data via API can offer significant efficiencies that make automation attractive despite legacy infrastructure challenges. Automated decision-making with open banking data provides a competitive edge, enabling quicker, smarter, and fairer lending decisions.

At Equifax, we’re here to help lenders harness the power of automation, with tools that ensure confidence and control in every decision. By embracing open banking and automation, lenders can improve operational efficiency, enhance customer experiences, make better risk decisions and stay ahead in a changing market.

Feel free to contact me on joseph.welford@equifax.com if you’d like to know more.