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Fintech Q4 2023

Open banking apps and data can support the financially vulnerable

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Richard Newman

Corporate Affairs Director, Open Banking Limited (OBL)

Tackling debt is a serious challenge, but there are practical ways in which open banking — where customers can consent to share their banking data with trusted third parties — can help people take control of their finances.

Recent statistics from The Money Charity revealed that, in August 2023, personal debt stood at £1,846 billion, up from £35.1 billion in 2022 — an extra £660 worth of debt for each UK adult over the year. 

However, up-to-date banking data — information about daily incoming and outgoing cash — can give people a clear view of all their spending. Open banking apps can signpost people to budgeting tools to help them navigate their way out of problem debt. This includes debt consolidation and authorising professional advisory services to view this data, so they can offer targeted support. 

Financially vulnerable individuals 

Those in debt are also often financially vulnerable. This means they may struggle to effectively manage their money, are prone to erratic spending or lose track of their finances completely — incurring further problem debt. They are also less likely to have savings to help them weather a financial emergency. 

Financial vulnerability affects around 47% of UK adults and can be triggered by life events such as divorce, job loss or bereavement, as well as illness or mental health conditions.

Financial vulnerability affects
around 47% of UK adults.

Identify unusual spending 

While financial vulnerabilities are often complex to identify and resolve, open banking data can be combined with traditional banking information to analyse unusual spending patterns, problem gambling or ‘financially destructive’ borrowing. With the correct consent, this behaviour can be highlighted to the individual or a trusted contact, allowing them to address the problem. This could be signposting tools and services that can improve their financial health or give them access to cost-effective credit.  

One open banking platform, for example, has lent over £4 million to 3,000+ customers who do not have a credit score and would otherwise be excluded from borrowing. It can quickly check an individual’s eligibility for benefits (over £16 million goes unclaimed each year) and support potential claims too.  

Improving financial wellbeing

Open banking apps, particularly account aggregators, can also help people in vulnerable circumstances understand their financial situation better and improve their financial wellbeing.  

More than 7 million people in the UK are already using open banking-powered products and services. We expect the insights offered by open banking data and apps to play a growing role in supporting affordable borrowing, debt management and the financially excluded.

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