Apple acquires UK open banking startup Credit Kudos
ffnews.com
ffnews.com
While I understand that high value lenders (e.g. mortgage providers) made similar assessments based on submitted paper bank statements, the massive proliferation of these services using Open Banking (or worse, screen scraping after requesting your account credentials) is concerning. Especially in cases where they use difficult to reason about AI/ML algorithms. The volume of data that can be gathered far exceeds the n-months bank statements typically requested by a mortgage lender, and it seems that most lenders use third parties like Credit Kudos rather than doing the same risk analysis in-house. Generally speaking, I don't trust them and their networks of partners and contractors to keep my data secure.
And it looks like it's becoming increasingly difficult to avoid these services when applying for a mortgage.
Sounds very odd. Handing your log in credentials to anyone is against the rules not to mention common sense. Even the bank itself will never ask for that. My bank's website has warnings about this right on the front page.
In U.S. most "open banking" is still done via asking people to share their banking passwords.
[1] https://www.justice.gov/opa/pr/justice-department-sues-block...
Because open banking is regulated, consumers now have a layer of protection that they didn't have before. And more people can prove their actual creditworthiness (as opposed to whatever credit bureaus think their creditworthiness is).
Full disclosure: I'm a cofounder of Nordigen, a freemium open banking platform. Views biased.
I'm sick of regulated solutions and generally moving toward more governmental reliance.
I wouldn't need a student loan or a mortgage if the government wouldn't cause inflation and back loans for every milestone of adulthood.
College and homes used to just be affordable. Everytime we bring in governmental assistance and regulation, we all just lose--well, not the players in the regulated and Frankensteined market, but normal people all just lose.
Previously 'governmental assistance' of council house building was the major house builder in the UK.
https://www.fhfa.gov/about-fannie-mae-freddie-mac
> Fannie Mae and Freddie Mac were created by Congress. They perform an important role in the nation’s housing finance system – to provide liquidity, stability and affordability to the mortgage market. They provide liquidity (ready access to funds on reasonable terms) to the thousands of banks, savings and loans, and mortgage companies that make loans to finance housing.
At some point we will have to allow housing to correct. It’s up there with social security running at a loss as problems we leaving for the next generation.
A separate regulation - the GDPR - would cover that but raising a complaint is very difficult and a complaint would involve the subject being aware of their data being misused; you can't complain about something you don't see.
My worry about Open Banking is that it makes it much easier for companies to collect a lot more data and would normalize the practice even more.
Currently there's already no reason for a credit check to be required for a lot of services such as internet or phone service (those aren't lending any money and can cut off the service in case of non-payment), but at least a credit check gives them very little personal data compared to Open Banking - I'd rather not have to give them even more data.
...until it is no longer possible to function as a normal economically active member of your society without "consenting" to the data sharing. As others have said that might mean that you can no longer get a phone or a mortgage in some cases. Given the financial services industry doesn't exactly have a glowing reputation for either responsible handling of personal data or fair and rational decision-making processes some middle ground will need to evolve here if widespread abuse is not to be an inevitability.
Now I'm avoiding all this stuff like the plague. I'll never hand out access to my bank account through API to anyone. No inter-banking features or cool fintech apps for me, but oh well. My bank has good enough offer and the app is nice too.
If that were the case, it'd be a more convenient alternative to sharing statements as opposed to a massive violation of privacy.
Not quite what you're asking for but access does need to be regranted every 3 months.
[1] https://basiq.io/blog/the-definitive-guide-to-open-banking-i...
[2] https://dassanawijesekara.medium.com/the-developers-view-of-...
For 10 years I had to fight one of the 3 major U.S. credit bureaus to get them to remove a bankruptcy that was showing on my report because a relative with the same name happened to have a bankruptcy in their past. Think about how incredibly stupid that is - I was 18 at the time, so according to this report I started a business at 12 and filed Chapter 11 at 16. I had a different social security number, address, and DOB that should have made things painfully obvious, yet still the burden of proof was on me to show why this report was false. Oh, and you can only challenge it by snail-mail (at least back then). If you don't get a response, there is no number to call, no address to visit, and practically speaking no way to challenge the agency short of hiring a lawyer.
Not to mention the obvious problem of credit bureas relying on length of history as a primary determinant of credit-worthiness. I don't like debt so I didn't get a credit card until 28, and did so then only because I knew I needed to build history if I ever wanted a house. If you are a responsible steward of your finances and choose to avoid debt in lieu of paying with savings, then that lack of history may preclude you from getting a loan in the future. You could have a $2mm net worth but that credit history will still be a problem with traditional lenders.
It's worse for immigrants - the U.S. credit agencies often don't interface with their home country's agencies. Imagine a responsible 60 year old adult with a pristine record in their homeland, viewed as a risky borrower by the bureas here due to lack of history. Another problem is not having a large enough number of credit accounts. I don't need more than one card, so I just use one card, but that's a negative on my report because the agencies wan't to see multiple "revolving accounts" (credit cards) holding a balance. You have to... wait for it... have more debt to show that you're good at managaging debt.
I could go on at length about how shitty the 3 main bureas are, and if this comes off as ranty it's because, if it's not obvious, I absolutely despise them and would love nothing more than to see them relegated to the graveyeard in short order.
It is quite a strange system to me from a non-American perspective. A US acquaintance of mine told me their parents signed them up for a credit card as a teen so they could “build credit” early on.
The US way is extreme, but credit absolutely does exist here and works the same way - you'll get much better deals for insurance and loans if you have it, and it takes years of payments without issues to build it.
I grew up in a system where only negative credit history was shared between banks. If you had no credit history, you had perfect credit history. Your creditworthiness depended on having regular income and paying bills in time. Based on that information, banks determined an overall limit for all your loans and other forms of debt. If you had a credit card, you would get a smaller mortgage. Large credit limits relative to your income and spending signified risk rather than creditworthiness.
Here in Czechia, it's like you say, no history = perfect credit - but as I said, you'll get much better deals (after counting in bonuses) if you have proven your credibility - and the normal deal you get with only "perfect" credit is nearly a financial suicide. Building your credibility by having a credit card (and paying on time) is as good idea here as it is in the US because you don't pay interest until the next month so it's free.
The only difference is, in the US it's institutionalized (and thus transparent) whereas here I have to do under-the-table dealings with the bank's independent sales representative. Sucks, IMHO.
Really, we in EU get all the good features with none of the bad things that the US people suffer from. I recommend to ask your bank about their available deals.
In the banking app, I was watching my credibility directly affect the loan offers available to me in real time. I got my interest rate down to half of the usual deal (which is based on my income and expenses) after a year of paying back on time. It really pays off.
"You have to... wait for it... have more debt to show that you're good at managaging debt."
Suddenly made sense, despite being intended as sarcasm / surrealism. Everything else in life, I get better at by practicing. Debt may be similar; getting that first credit card, regardless of age, CAN be alluring temptation to max out. Some history of on-ramped, well managed debt, makes sense would be a prime proof that "one can manage debt" :-/
I already dislike the requirement of submitting to a credit check for services that aren't lending (and thus don't have to comply with finance-related regulations), have a fixed cost and can be trivially cut-off in case of non-payment such as internet or telephone service. Sadly, this battle has already been lost and the practice has been normalized; most people don't bat an eye and in monopolized industries they don't have a choice anyway.
Open Banking making this even easier is not a good thing as it just means more and more companies will now be doing this, with the inevitable overreaching data collection that follows.
At least with a credit check, all the information they get is identity verification and a very high-level overview of any credit accounts you have open and whether they're in good standing.
With Open Banking, they get a full account history, including detailed timestamps and locations for card purchases (if the bank supports it - modern banks do, and it's just a matter of time before legacy banks catch up). That's a lot of personal data which can be misused for discrimination, price segmentation, etc with very little oversight.
Of course that was over a decade ago. And if this data becomes another revenue stream, of course that won't be an option.
How long has this been a thing?
Thanks for the info!
I don't have my records from 2015 to recall if it was hard or soft.
I'm in Canada, not the UK, but the last time I had a post-paid plan with a cellular ISP (~2015), they actually structured it in the contract as some type of revolving credit instrument, where your "credit limit" is the maximum outstanding invoice amount you can have before they cut your service off. Like any credit card, this actually involves the cellular company — as underwriter of the loan — locking up some of their own assets for each customer account, commensurate to said credit limit. That small amount of extra revolving credit showed up on my credit report!
My understanding is that they do this because, much like a credit card, cellular accounts can actually generate non-predictable-to-the-underwriter charges. Long-distance (esp. 900) peerage fees, instantaneous charges from SMS short-codes, and purchases through SIM Toolkit "apps", can all bill a cellular account directly; with the latter two classes of fees not being settled after the fact, but rather settled immediately (so the relevant merchant can receive their cut), with the cellular ISP temporarily footing the bill for them until you pay.
Chase is guilty of this.
I went to a Chase branch a few years ago to ask about a mortgage. The banker put my SSN into the computer, and told me the computer said no. No questions about my income, no request for financial statements or account balances, or anything. Just that the computer said not to bother continuing the process.
I asked my accountant about this, and she said it was because of the way my income was structured, and that the computer "pre-approval" process has no way of understanding most of my six-figure income because my life isn't so simple that I can use a plain old 1040-EZ.
I'm sure that some banking middle manager sees these "AI" systems as wonderful things that reduce risk, or cut expenses because human beings are no longer needed to make decisions. But they hurt real people and contribute to the ongoing housing crisis. But, hey, as long as some MBA can use his budget-trimming bonus to buy a second boat, that's all that matters.
I once used this for a personal home rental application, and it automatically slurped in all my business incoming invoice payments and based on that was like "Yeah you can afford lots of rent!"
It's probably worth clarifying that there are no institutions that would be categorised as "open banks"; Open Banking [0] is an umbrella term for a set of technologies (primarily APIs), regulatory frameworks and standards which allow easier integration between businesses in the financial services industry. The bar for getting access to those APIs is high enough that it would generally exclude customers who'd like to query their own accounts from their own software, but not so high to stop the proliferation of startups keen to monetise and analyse customer transation data. For the most part, in the UK you can't just ask your bank for an API key and use it to pull transaction data from your own account but your mortgage lender can require you to share that data with a third party as a condition of extending a line of credit.
I believe this is how Experian Boost works in the UK; you can "boost" your Experian credit score by linking your bank account via open banking and allowing them to analyse your transaction history. However you would need to read (and fully understand the breadth of) their privacy policies and terms and conditions to understand how your transaction data is used (and how it may be used in the future).
One of my primary concerns is around data being shared on, and on, and on. Regulation helps a little, but I'm afraid that we'll end up in a similar situation as we have with other types of data online (analytics, advertisement targeting and telemetry) where you may opt out of certain types of data collection but find that next tab on the opt-out dialog lists hundreds of partner organisations with a "legitimate interest" in your data. And with financial services, it's even more sensitive - it would be disastrous if people were excluded from applying for a mortgage because they refused to share incredibly detailed transaction history with a third party credit risk firm. And worse still if, upon sharing that data, they were denied a mortgage because placing an occasional bet online, subscribing to an OnlyFans creator, spending thousands at the Apple store and trading some disposable income on eToro fit a pattern that a black box algorithm deemed high risk.
It would be better to have credit decisions not rely on such invasive analysis of personal data.
I guess it's a two-edged sword.
I'm (just) old enough to remember bank managers that managed banks (OK branch managers) and requesting loans where someone would review your history by eye and make a decision on that and a few well chosen questions.
This was also a place that opened at 0900 and closed at 1700 and was not available at 1200-1300 and also couldn't be arsed to help you out arbitrarily. You had to take time off work to visit a bank - yay! Meanwhile they made profits from your credit balance (investments) and your debit balance (interest). Go overdrawn? that'll be a letter (£25 in 1995ish) and punitive interest.
That was the past but: Banks are profit generation centres. My personal wealth has (there's always the mattress) to be lodged in a bank and they insist on making a profit out of me.
As far as the UK is concerned, neither. There is no Apple Card in the UK (or indeed Europe for that matter, AFAIK).
In America apple doesn’t use Goldman for their financing of products unless it’s financed via Apple Card.
These are good ideas. Many people have debt from all kind of life issues and it kind of seems insane to lock them out of financing for … a phone or the like.
The credit score system is the OG social credit system that China ain’t got nothing on.
Why is that insane? Why would a company essentially loan money to people they think are unlikely to pay them back? A £1200 iPhone is certainly not essential when there are serviceable equivalents for < £100 without the need for a contract.
Overall, I cannot fathom how we tied the credit system to something necessary like housing. It’s absurd to think you are fucked out of housing options for 7 years.
growing up, this has been my idea and i cannot imagine tying myself "in future" to an item of convenience or luxury if i can't already pay it in cash.
a large part of it comes from the reason that i am not a government employee who traditionally have enjoyed a "get employed and you will get your salary till you die", those people can certainly portion off their salary, future even because there is essentially 0 risk of being let off. OTOH, being a professional with no "assured" income, this is not possible.
i know people, like many who sport a credit card, own a vehicle for the lulz and the "experience" of making heads turn but i can't care less about neighbours idea of me owing or not owing an iphone or a top line car. meh
With that attitude, about 99% of people couldn't ever afford a house because there is no way on saving the cash needed and paying rent at the same time.
Also somewhere there is a succinct explanation of how when you want a loan from a bank for a new property, they go to the central bank and get one to finance you, thereby creating money out of thin air, and adding to monetary inflation... but please correct me if I'm wrong
you are right about housing though. i agree. in my town, the property prices double in 4-5 years. In the 25 years we have built our home, land prices have gone up 68x and they are growing fast.
my argument was on credit cards and disposable income spending.
Well, maybe.
Underwater mortgages are a thing.
2. Taking a huge loan out when you have little prospect of being able to pay it back is a persons own responsibility. I've been in debt, I know lots of people in debt, and in almost all cases it's due to my/their own poor decisions. This conversation changes if you live in the US and experience medical debt (not something we deal with in the UK).
3. Again, depends on your jurisdiction, but housing is typically available in some form (just not ownership) even to people with poor credit ratings.
Student loans, if that's what you're referring to, are basically 0-risk because they'll either get wiped out by the government at some point, or the person will eventually pay it off within their lifetime; this is helped by how you can't discharge student loan debt in bankruptcy.
I am with you there. But unfortunately, many entities check credit to decide whether they want to rent you an apartment, whether they want to install pre-paid home internet to your house or hire you for a job in many instances.
So my argument is simple, if you want to check my credit to rent me an apartment, then the credit system should use my rent payment to increase my credit score, and this should apply to every bill I pay, be it prepaid or post paid.
Of course, that friction has greatly been reduced due to computers and internet, so it is possible to get a more granular look at people’s ins and outs to more precisely establish credit.
I think checking accounts or an equivalent should basically be a government utility at this point, available to all.
If you have zero credit history, yes, you are risky because what's unknown (including to you) is how your personality interacts with debt and what's known is that you have zero experience managing debt.
That's a US (and maybe some other countries as well) perspective, but not the same for all countries. e.g. in The Netherlands, your credit report is mostly concerned about how much debt you have (vs capacity to pay) and if you have debts in arrears. I understood historic debt payments don't really factor into it here.
Note that different debts do have different weights. e.g. a car loan for 20k can reduce the limit of your max mortgage by 50k because its a bigger impact on your capacity to pay.
The current system incentivizes card swipes for credit cards, not borrowing.
They don't need the very obsolete technology, obsolete business processes and obsolete management mentality of most existing banks. Much better to start with a greenfield site and acquire customers from there.
Many people would drop their existing bank in a heartbeat if there were a viable modern alternative. Apple is in a perfect position to capitalize on this widespread dissatisfaction.
Some of the neo-banks (less so, Revolut) would be a rounding error in Apple's market cap valuation. Relatively "cheap" for Apple, more feature rich than American alternatives, and for good measure wouldn't bring with them the legacy issues you mentioned that are associated with the dinosaur institutions.
There already is a standard for open banking in the EU with PSD2.
The closest service I have gotten to this was (also not exactly an EU company) American Express - but that was still two different legal entities.
For example, Revolut is a bank in the EU via a Lithuanian banking license, but only an "e-money institution" in the UK (though the application to become a British bank -- and for that matter, an American bank, and other jurisdictions -- is in progress).
Monzo is a UK bank, but opted to cancel their US banking application, and I don't believe is an EU bank either (someone please fact check me here!)