Use of Open Banking & CRA's

From reading articles written about Fronted as well as discussion some of us had on the Monzo forum about Fronted, I’m interested in how you plan to use Open Banking to build credit products and how you plan to assure that people are honest with you when supplying you with Open Banking authorisation.

One thing I liked about the sound of Fronted is that you plan to use the Open Banking api to look into borrowers financial history instead of the estate agents normal “Give us 6 months of bank statements etc…”. What I’m mainly wondering is how can you be sure that the potential borrower is not misleading you with the account they provide you? For example, person a has 3 current accounts, one that has a large overdraft which they’ve missed repayment criteria and are over the limit for multiple months in a row, one that doesn’t get used anymore but the person has a loan with the same bank where they have had the occasional late/missed payment and lastly a fairly recent account which is now their main account with their salary being paid in and bills out etc with no arrears.

What’s to stop that borrower only supplying you with that last bank account and pretending the others don’t exist? Do you plan to carry out credit checks alongside the Open Banking requirements? If so what does the Open Banking offer you that the CRA’s don’t?

I understand that a limitation of Open Banking means that you can’t see all accounts somebody holds so how is that issue overcome?

Sorry, I know it’s a longwinded question but a similar topic came up on Monzo the other day about how Open Banking can’t replace CRA’s, so wondered roughly how you were handling it?

Here’s some links on previous articles and discussions :slight_smile:

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Hey Addzy, We’re still working on this internally, but broadly there’s a few different things we need to ensure:
Most importantly we need to be responsible lenders, ensuring we don’t contribute to “over indebtedness.” This is the most important thing, and it’s something other lenders do by either asking the customer to estimate their monthly loan repayments, or by checking with the major CRAs.
We will be reporting to CRAs, so that payments to Fronted can be taken into account by other lenders when deciding how much you can afford to borrow.
We also believe that the Fronted deposit loan can only be used to help provide a rental deposit, and a roof over your head is a basic human right.
We can’t go to much into the decision engine we’re building (because we’re still building it). But things like checking that we can see your income (from your employer), and checking that we can account for outgoing payments to other loans you might have, goes a long way to ensuring that we’ve correctly assessed how much you can safely borrow.

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Yh I assumed you wouldn’t be able to say a lot because you’d still be building it, I mainly hoping to establish if and how you’d utilise CRA’s and how that interacts with the data you get from the Open Banking.

I look forward to hopefully hearing more about how it all works as the product progresses :slight_smile:

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We are working with Credit Kudos (a regulated CRA) it’s just that we don’t think (because of the nature of how we send the money and the affordability checking we do through open banking) we need to do the hard checks that are associated with most creditors.

Once we know ourselves what it looks like we will happily share it - it is important people understand how their data is being used and what conclusions we are drawing from the data available to us.

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They look like an interesting take on your usual CRA, do they not collect data from banks and other lenders? How do they work?

I was thinking that about the checks, I love hwo you plan to works, it’s so simple but genius, I can’t believe it’s not been done before

We use them for open banking connections (they are a regulated account information service provider as well) and a product called Atlas (which is essentially an underwriting terminal). This gives us access to the financial and behavioural data our underwriting policies are based on so we can make lending decisions.

You and me both… I was looking for this product 'cos my partner needed something like it. So, we are going to build it :woman_shrugging:

I really do wish you all the best with it. We’ve unfortunately moved 4 times in the last 6 years, it makes saving up another deposit impossible, the last two moves have involved asking family to front the deposits until our old deposit is returned. Having you guys around would have been fantastic.

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Thank you - we hope it will help a lot of people who are similar to you.