Open banking is a term we have been hearing a lot over the past three years since the concept emerged as a means of allowing third-party access to banking and financial accounts.

The initiative aims to increase information-sharing between financial institutions in order to make new financial products and services more accessible to individuals and businesses alike. It also promotes greater transparency by allowing new and dynamic ways for consumers to track and control their finances.

This is more important than ever in light of the recent COVID-19 pandemic, which has pushed many customers to take a step back and reassess their financial health. In doing so, they face the hurdle of only being able to access limited, individual bank accounts rather than a holistic view of financial activity, which naturally lends itself to more flexible and agile options.

In addition, open banking significantly decreases the processing times of banking applications, as the need for multiple KYC and AML checks is reduced.

So, what does this mean for property buyers in the UAE? 

A study conducted by Colliers in the second quarter of this year showed that 91 percent of real estate purchasers were first-time buyers, indicating a huge appetite for buying over renting. In turn, this has fuelled a rise in demand for home loans, with 1,189 mortgage transactions worth US$2.8 billion in Dubai during the month of August 2020 alone.

Having said that, for many wanting to make this transition, one of the main barriers to purchasing their dream property is selecting and securing the best financing product. The process can be complex, arduous, and overwhelming.

We have already begun to simplify this process at Holo through a secure algorithm-backed platform that gives prospective buyers access to a full range of unbiased mortgage and remortgage options that meet their specific needs within minutes. Now, imagine what we could do if an applicants eligibility could be predetermined based on full visibility of their credit history, spending patterns and savings, without them even having to fill in a form?

Of course, this comes with its own set of challenges namely, data security. Understandably, customers raise a red flag when they think third parties could have access to their personal and banking information. This is where regulators, brokers, and financial institutions must all play a part in ensuring the right guidelines and infrastructure are in place to ensure the protection of the end user.

We are witnessing a surge in the number of fintechs building platforms that enhance the customer journey, but without a framework to support open banking in its fullest capacity, the experience will remain one-dimensional.

The onus is on all of us, as members of the country's financial ecosystem, to contribute to the progress of this sector, whether that means governing authorities putting parameters in place to allow secure data sharing, innovative companies exploring new backend systems to facilitate, or brokers helping to assuage customer concerns by effectively explaining the process.

We at Holo are certainly looking forward to collaborating with our peers, wherever necessary, to make this a reality.

This article was originally published by Wamda in December 2020.

This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.