The next generation wants control over their data for a more transparent lending experience
Having grown up with the internet, smart phones, and social media, young Millennials and Gen-Z borrowers are particularly savvy about using their digital footprints for their own benefit.
They embrace technology to streamline everyday tasks and they want to make informed decisions about transactions. As they increase their presence in the workforce, they are becoming the generations poised to drive the future of lending.
When Mastercard surveyed 7,600 consumers across the United States, Canada, the United Kingdom, Australia, France, Germany and Spain about their recent financial experiences, young people’s voices came through: They want a more transparent, simpler, digitally-enabled lending process.
And open banking can make this a reality. Using secure APIs, advanced data analytics, and machine learning, open banking technology allows consumers to safely share their financial data, giving a more up-to-date and holistic view of their ability to repay a loan or afford a line of credit.
Most borrowers are already on board. According to our survey, 77% of those ages 45 to 60 and 68% of those over 60 are willing to grant access to their banking data to secure a credit or loan. Among respondents 18 to 29, the number shoots up to 84%.
Nearly 60% of younger customers have already linked their accounts while applying for a loan. And, as digital natives, nine out of ten would prefer a loan option with a digital application or approval process.
The consumer base is changing, opening a window for the industry to evolve in step. Today’s borrowers are calling for a new, digital-first era of lending, giving applicants more control over the information used to determine their creditworthiness.
By allowing consumers to share access to their financial data, open banking can provide
s a current view of their ability to repay a loan or afford a line of credit for more transparent lending decisions – and a more financially inclusive economy.
Younger borrowers are embracing digital lending
Read more about the future of lending in Mastercard’s Lend Report here.
How open banking paints a more nuanced picture of borrowers
Even in the best economic circumstances, loans are often a necessity, especially for critical purchases like homes and cars.
For some insight into the lending landscape, Mastercard surveyed 7,600 consumers across the United States, Canada, the United Kingdom, Australia, France, Germany and Spain about their recent financial experiences.
The upshot: 89% have been adversely affected by economic pressures, and nearly half are struggling to get the loans and credit they need.
Traditional credit scores do not always reflect an applicant’s ability to make payments. Individuals with thin or no credit history can struggle to qualify for credit. Young adults on their own for the first time, gig workers who deal mostly in cash, new Americans and retirees with a single credit card and no loans can struggle to qualify for leases, credit cards and mobile phone contracts.
To most consumers, change is overdue — 87% believe the decisioning process should make it easier for responsible borrowers to prove their ability to repay.
Open banking could help provide that missing piece. By choosing to share their bank account data, applicants can paint a more complete picture of who they are. Real-time insights into their accounts — such as a thin credit borrower’s biweekly deposits, cash flow or consistent payments for bills like utilities — offer an up to date, more comprehensive view of their financial health.
This shift in consumer mindset opens new horizons for lenders, allowing them to champion more inclusive processes.
Open banking has the potential to accommodate millions of thin-credit applicants who have previously had difficulties accessing the benefits of the financial system. Consumers have spoken. They want the next evolution of lending to prioritize transparency, accessibility and empowerment for consumers worldwide to build a more inclusive digital economy where everyone thrives.
Digital lending is on the rise
The data revealed in Mastercard’s Lend Report shows global consumer support for a more transparent, digital-first approach to lending. Read more about the future of lending in Mastercard’s Lend Report here.