Are agents fully embracing Open Banking? Once lauded as the future of proptech, open banking should now be the everyday norm in letting agencies up and down the country.

Although we’re almost four years on from when Open Banking was introduced, there’s still a mystical feeling around the process, perhaps even a note of mistrust. If you’re a letting agent who hasn’t quite got their head around open banking, Canopy is here to get you up to speed.

What is open banking?

Up until 2018, banks and building societies held all the valuable data needed by renters and letting agents to get tenancies off to a good start. Finding out how much a tenant earnt, whether they were living in a huge overdraft and if they paid previous rent on time involved the renter supplying multiple documents and sources, which made the process time consuming for agents and open to abuse.

Open Banking now provides a safe, secure digital exchange of information between financial institutions and permitted third parties. Regulated platforms with bank-level security and end-to-end encryption are already in place, with over 125 Open Banking enabled products and services now live. 

So what does this mean in practical terms? Letting agents can request to see a tenant’s financial data at its source – think of Open Banking as a direct, real time view of a renter’s financial history and current standing. 

Solving today’s problems

Paperwork that pertains to identity and personal income is a hot topic in 2022. A turbulent economic outlook and a post-pandemic hangover is putting pressure on people’s finances, and some renters may take a more ‘creative’ approach to securing a rental property. Open Banking can be the first line of defence for letting agents in such situations, with the ability to verify a tenant's financial health directly with the renter’s bank. 

Referencing revolutionised

While a referencing framework has been in place for years, detailing what documents are needed to verify status, eligibility and income, it has been left to letting agents to gather copies of the necessary documentation. The process often involves the laborious requesting, scanning and printing off of bank account statements and wage slips – all while the landlord waits impatiently for verification to fill the void.

Before Open Banking, agents could only work as quickly as the financial institutions and renters but once consent is granted, Open Banking allows same-day instant checks, with delays avoided, lets filled faster and those with poor financial health identified with ease.

Onboarding is simpler than you think in 2022

Canopy is making Open Banking a much simpler proposition for letting agents and tenants with our RentPassport™ product. There are no complex forms or wet signatures, with Open Banking onboarding as simple as sending an email.

Agents contact tenants via Canopy’s HQ dashboard, requesting Open Banking consent. Once permission is granted, the onboarding is complete. The agent quickly gains direct access to up to 12 months of a tenant’s salary payments and their rent payment history too. It’s also easy for agents to add in extra checks with RentPassport™ – they can tick a box for employer and past landlord referencing, plus there are credit checks powered by Experian that reveal evidence of CCJs and bankruptcy. 

Help tenants build their credit score

For many years, tenants have been frustrated that their regular rental payments count for nothing when it comes to credit scores, while their mortgage-paying counterparts are seen as more credit worthy. Open Banking is designed to address this aspect and letting agent can get onside with tenants by promoting Canopy’s RentTracking™ service. 

The power of Open Banking allows our app to securely link with both the leading credit reference agencies and the bank accounts of tenants. Once renters have signed up to Open Banking, they can tag their regular rental payments and Canopy will report these amounts to their chosen credit referencing agencies. Each regular payment will be rewarded, boosting the tenant’s credit score and improving their chances when they come to take out a mortgage, loan or credit card.

Shutting the door on fraudulent activity

While the majority of renters sign a tenancy agreement in good faith, there are rogue renters just as much as there are rogue landlords. For some tenants, evidencing a steady income or reliable credit history may be more of a challenge in 2022, and letting agents need to vigilant for subtle but suspicious behaviour.

One of the most common fraudulent activities in lettings is the forging of renting’s essential documents. Bank statements and wage slips are top of the list, with alterations a result of a sophisticated process. Agents shouldn’t assume there will be a tell-tall slick of Tipex when looking for illegal corrections.

No matter how petty any fraudulent changes are, letting agents need to spot anomalies with speed. Open Banking provides watertight security that paper statements can’t. The direct connection between a bank and third party cannot be manipulated, falsified or tampered with. As a result, the open banking snapshot gained by agents is instant, accurate and critical for 2022’s evolving landscape.

When big money matters

Letting agents will be used to ever-tightening AML (anti money laundering) regulations but they may be unaware of how open banking can improve their due diligence, especially if they think their agency isn’t exposed. Criminals have long targeted the rental market to launder money but agents are misplaced if they think it’s a problem unique to London. 

As reported in The Negotiator magazine in 2021, regional towns and cities are also susceptible, especially agents in provincial locations who are identified as having an over reliance on manual AML checks and a lack of electronic verification systems.

Open Banking is 2022’s star player when it comes to AML and KYC (Know Your Client) checks, giving agents the best chance to spot suspiciously large or irregular monetary transactions. It’s a proptech development that small and independent letting agents should explore just as much as the big agencies, especially as open banking is already widely adopted in the tenant community.