Your guide to open banking

Written by

Saul Harris Brannigan

Saul Harris Brannigan is a risk specialist here at Novuna Personal Finance. He has many years of experience as a risk analyst, working to improve our application process to incorporate the latest advancements in technology such as open banking.

Thursday 4th May 2023

Open banking is a swift and secure way for lenders like us to see your bank account transaction data electronically. Knowing how much money you have coming in and how you spend it allows us to assess your affordability quickly yet thoroughly. This helps us to make an informed lending decision when you apply for a loan with us.

In this guide, we take a closer look at what open banking is, its benefits and how it can be used during the loan application process.

What is open banking?

Open banking is a secure online system that provides third-party financial service providers with limited access to the financial information of their customers, provided they have granted permission. Banks use application programming interfaces (APIs) to allow access the requested information.

Open banking makes it easier for us verify income and expenditure without having to manually assess bank statements. This speeds up the decision-making process for your loan application and, in some cases, may increase the chances of your application being accepted.

How is open banking used when I apply for a loan?

We use open banking to help us make a responsible lending decision.

If your personal loan application is referred, and we need more information about your financial circumstances, we can use open banking to assist in our affordability checks.

When you apply for a loan with us, you will either be accepted, declined, or referred. We may be able to make a lending decision based on the information provided in your application and credit report.

However, if we need to know a bit more about your financial circumstances, we may refer your application. This means we’ll need to take a closer look at how much you earn and what you spend your money on. Without this additional information we won’t be able to make a decision on your loan application.

We conduct a three-tier affordability check at Novuna Personal Finance, which allows us to develop a clearer picture of the demands on your money and how you typically handle your finances. As part of this approach, we’ll need to look at your bank statements. There are two options here:

  • You can send us copies of your bank statements from the past three months
  • You can grant us permission to use open banking to see the information we need

The majority of people find it more convenient to allow the use of open banking. The process is much quicker as we can access the information we need to make a lending decision almost instantly.

If your loan application is referred, we will ask to see your bank account transaction data. If you choose to go ahead with open banking, you will be taken to the platform which allows you to control what information you share with us.

We will ask for one-time access authorisation to see six months’ worth of transaction data. Once permission is granted, you will be asked for details of your main bank account. You will then be directed to your online or mobile banking app directly and asked to enter your online banking security details, which adds an extra layer of security to the process. Your bank will then grant us access to your data.

Remember – you will never be asked to share your bank login details or passwords with a third party when you are asked to grant open banking access.

What information can the lender see?

If you give us access to your current account data, we will be able to see your:

  • Account details, including the name on the account and the balance
  • Incoming payments
  • Transaction information, such as details of Direct Debits, standing orders and other payments
  • Features of the account such as fees, overdrafts or rewards

Think of open banking information as a digital version of the information you’d see on a bank statement. It’s used to help us gain a better understanding of your financial circumstances.

We use open banking to:

  • Verify your account information
  • Verify your income
  • Ascertain how much money is regularly coming into your account
  • Understand what your outgoings are
  • Assess where you spend most of your money – your outgoings are categorised, allowing us to see at-a-glance how your money is being used

From this, we will be able to build a picture of your spending habits. By understanding how much money you have coming in, and what demands there already are on your finances, we can assess whether we believe you’re in a financial position to take out a personal loan.

As a responsible lender, we never want to put additional strain on a customer’s finances. So it’s important we only ever lend money to those who are likely to be able to afford the monthly repayments.

The benefits of open banking

  • Allows finance providers to conduct thorough, responsible lending checks
  • Saves time getting a decision on your application as we can get a clear view of your financial circumstances much quicker
  • More convenient for you – no need to retrieve and send hard copies of bank statements
  • Can be particularly beneficial if you have a limited credit history, as we’ll be able to see more information about your incomings and outgoings even if you don’t have a track record of paying back debt
  • Allows you to choose what data to share in a secure environment without affecting your credit score (although do remember that a hard search will be recorded on your credit file when you apply for a loan)
  • A more secure way to share financial information with greater levels of fraud prevention

Is open banking safe?

Open banking is a secure online system that is fully regulated by the Financial Conduct Authority (FCA) and backed by the UK Government. It uses secure APIs and encryption technology to keep your information safe, and you’ll also be asked to authenticate your details before access is granted too. You can find out more about the open banking system and why it’s safe directly on the Open Banking website.

All information received by us via open banking will be treated as highly confidential and will not be used for any other purpose than helping to inform the lending decision.

Open banking FAQs

How do I know if I’m eligible for open banking?

You will need access to online or mobile banking to be able to use open banking.

Your bank or building society must also offer open banking – you can see the list of regulated providers via the Open Banking website.

How soon will an application decision be made if I grant permission for you to use open banking?

Once we’re able to access the information we need to make a lending decision, you should receive a decision quickly. We are usually able to provide a decision by the next working day.

I can’t see Novuna Personal Finance on the directory of regulated providers – why?

We work with a third-party organisation called Consents Online Limited to offer open banking to our customers. You will be able to find them listed on the OBIE’s Directory.

How much information will you see?

We will see similar information to that contained in your bank statements. We will be able to see six months’ worth of bank account transaction data, including how much money has entered your account and what you’ve spent that money on.

This allows us to build a picture of how you manage your money, and whether you will have enough money leftover at the end of every month to comfortably repay the loan you have applied for.

Will I be charged to use open banking?

No – it is free of charge to grant us access to use open banking.

Can you take money from my account using open banking?

Novuna Personal Finance will only ever use open banking to view transactional data.

While the open banking system can be used to make a new type of payment called Variable Recurring Payments, you would need to grant specific consent for this. It is not something Novuna Personal Finance would ever ask for at this time.

How long do you have access to my bank account data?

We ask for one-time access, so we only have access to view a one-time snapshot of data granted to us at the time you gave consent. We won’t have access to future banking information, just as we wouldn’t if we were reviewing hard copies of your bank statements, but we may be able to view that specific snapshot of open banking data in the future should it be required.

Other lenders may ask for longer ongoing access, which needs to be reviewed and regranted every 90 days. You can manually withdraw permission at any time, though, by getting in touch with the third-party financial services provider directly or by contacting your bank or building society and informing them you would like to revoke access.

What do I do if I have more than one bank account?

At this time, we’re only able to look at the transaction data for one bank account.

If you have more than one bank account, please choose to grant open banking access to your main account. The ‘main’ account should be the bank account your salary gets paid into.

Borrow from a reliable personal finance provider you can trust

Our use of open banking is just one of the reasons you should choose Novuna Personal Finance. With our competitive rates, experience in the market and exceptional customer support, it’s no wonder we’ve been named the UK’s Best Personal Loan Provider by for the last 10 years.