UK lender slashes rate for consumers sharing open banking data

The news: UK specialist lender Shawbrook Bank will provide a loan discount to applicants who share their open banking data, per AltFi.

More on this: The private bank joins forces with the credit department ClearScore’s open banking technology to assess applicants’ creditworthiness.

  • Shawbrook offers loans and savings products to individuals and small and medium-sized enterprises (SMEs) that cannot obtain financing from major commercial banks. Its products include commercial real estate loans, personal loans, and tailored financing and savings products.
  • ClearScore, launched in 2015, was the first UK service to give consumers access to their credit score and report. It now offers a credit check app and financial offers based on users’ credit records.

This is how it works:

  • Shawbrook will integrate ClearScore’s open banking data into its intelligence technology. This allows it to collect revenue and expense data at the point of application in real time.
  • Customers who provide open banking details at the time of application via ClearScore and are eligible for personal loans with Shawbrook Bank will benefit from a 1% APR reduction on the loan rate.
  • Shawbrook will only have access to an applicant’s data once to make a loan decision; he will not have access to this data on an ongoing basis.
  • Andy Sleigh, CEO of ClearScore UK, said: “Our research has shown that using an open banking system to open loans to just 5% of ClearScore’s underserved population would result in an additional £30m ($39.2m) in loans per month— a number that could increase significantly… as these users begin to use other forms of credit.

Key context: Transaction-level data is only available to franchise banks that own the customer relationship. But because a basic principle of open banking is that consumers own their personal financial data – with the right to use or share it, with requirements for data privacy, data permissions and secure exchange – these data now becomes, in effect, another asset that consumers can trade.

In this exchange, Shawbrook gets more complete and detailed information to make credit decisions and consumers get a discount.

The big takeaway: Since everything we own or do is digital or can be represented digitally, financial data sets can also be captured and traded as collateral. It’s reminiscent of the now-defunct New York startup Data shotwhich allowed individuals for a short time to sell their personal data, such as social media activity and credit card transactions, to information brokers for a monthly fee. Shawbrook’s offer is less drastic than that. But it’s much more transparent than other platforms and transactions that continually collect consumer financial data.