Two years ago, the Competition and Markets Authority (CMA) ordered the nine largest UK current account providers to open up their data for the new Open Banking initiative.
Open Banking has the potential to be a force for social good and will ultimately widen access to more useful, affordable and understandable financial products for everyone including tenants. From a letting agent and landlord standpoint, Open Banking will provide a more accurate view of a tenant’s affordability.
Many landlords may be unaware that thanks to Open Banking, tenants can now automatically verify income and past rental payments and share this data with their letting agent, or landlord.
Currently, there are circa 15 million private renters in the UK market who move every 12-18 months and each time, they need to prove to a letting agent and landlord their ability to afford a rental property.
Traditional tenant screening companies require ‘payslips’ and bank statements as proof of income, which in addition to being a painful experience for tenants, creates data privacy issues from a GDPR standpoint. The current referencing system is also extremely invasive, stressful and time-consuming for tenants.
Innovative technologies such as Rental Passports, which access Open Banking data, can provide proof of an individual’s rental and credit history and their ability to pay rent promptly, so that landlords know immediately if a tenant is suitable for a property.
Rental passports give tenants control in the application process, offering them a portable, digital rental identity, which helps them to improve their credit score. They also can reduce the back-office costs historically associated with the screening of prospective tenants and reduce the risk of rental arrears. This facilitates a trust-based relationship between all parties involved and enables ‘Generation Rent’ to become property owners quicker.
Tenant referencing can be eradicated with the latest, sophisticated fintech products, which can also bring huge improvements to the rental application and management process, making it a quicker and smoother experience for tenants. Landlords need to work with ‘best-in-class’ tech partners to build trust for renters. Eliminating tenant referencing costs is a first step towards that goal.
The industry needs to come together and build a rental ecosystem that will help millions of renters to achieve better rental and financial health. It is vital that we connect the disparate strands of rental housing journey into a seamless process. We need to look past pure profit maximisation and consider the bigger picture of building a better and more inclusive rental society.
Tahir Farooqui, founder and CEO, Canopy.