Open Finance's potential and the digitisation of tax records
Between coronavirus pushing the economy to the limit and a group of Redditors challenging the financial market hegemony, people are questioning the role of established institutions. If finance doesn’t work to benefit the economy, businesses, or individuals, then who is it for?
Yet, just as traditional banking models have been upended by technology, so too could finance.
Through Open Banking, challenger banks can connect services digitally, cutting inefficiencies and costs while speeding up transactions. Open Finance can build on this model to connect financial services via technology, upending the existing financial model.
So how could Open Finance benefit society?
Using tax Information
Every working adult pays income tax, creating a centralised repository of financial information for every UK worker. Unfortunately, HMRC is currently a black hole of information.
However, by Making Tax Digital (MTD), HMRC is effectively allowing individuals to keep tax records on their chosen software, providing assurance for any financial institutions using that information.
Individuals could then share some of this information via Open Finance to help with things like loan applications or managing credit scores.
Faster loan applications
With access to complete and validated financial information, lenders would be able to more quickly and accurately assess an individual’s risk.
Mortgage applications, for example, can take months to approve and, since property sales usually occur in a chain, these inefficiencies slow the process down for everyone and can have major impacts.
If, however, mortgage applicants could simply share validated financial/tax records, mortgage providers could use that information to make quick decisions with reduced risk.
This process could be applied to any kind of loan application, whether for a business venture or property purchase, for example, making finance a more productive driver of growth in the real economy.
Building accurate risk profiles
Currently, credit reference agencies use crude and easily gamed measures to assess risk.
Someone who has always been careful with their money and never taken out a loan or credit card, for example, will have a far worse credit rating than someone who regularly uses debt to finance their lifestyle.
With Open Finance, people would be able to quickly prove their earnings, spending, and savings, decreasing their risk profile in line with reality. This both transfers more power to individuals and contributes to faster economic growth while reducing overall risk.
Empowering PAYE taxpayers
Currently, PAYE taxpayers have little, if any, control over their tax contributions and can’t claim many of the same expenses as self-assessed taxpayers. Instead, PAYE taxpayers must use their already-taxed income for many expenses, especially homeworkers.
This imbalance could be rectified with MTD for PAYE taxpayers, allowing them to access their digital tax records using their preferred software, claim for reasonable allowances and benefit from Open Finance.
Ultimately, Open Finance has the potential to help people access finance quicker in order to grow their business and personal finances while reducing risk, inefficiencies, and costs. Not only would this lead to growth and recovery, but it would also reduce risk, helping make finance more sustainable.
This article was contributed by Sudesh Sud, Founder and CEO of APARI.
Sud started in the accounting profession with KPMG, where he worked with some high-profile global clients, including Credit Suisse and JP Morgan. He started APARI in 2018.
The Ultimate FinTech & InsurTech LIVE Event
From October 12th-14th, 2021, BizClik’s FinTech & InsurTech event will bring together influential executives from around the world. Streamed live from Tobacco Dock, London, this three-day event will be an excellent way to finish the year strong, gaining the confidence your company needs to move forward into the future.
With keynote addresses from global leaders, dynamic roundtable discussions, and extensive networking opportunities, FinTech & InsurTech 2021 will expand your network, deliver insight, and enhance your organisation’s reach.
Already confirmed speakers include Colin Payne, VP & NextGen FS Global Lead at Capgemini; Dipu KV, President and Head of Operations & CX at Bajaj Allianz General Insurance Company; Bryan Caroll, CEO at TNEX; and Lucy Demery, Managing Director at Barclays.
The event will include:
- Keynote addresses from respected industry leaders
- Dynamic live roundtables (inc. Q&A)
- Fireside discussions
- Inspirational Speakers & Presentations
- Extensive networking opportunities
Meet the Speakers
Each week, from now until the event, we’ll be announcing the latest speakers who are set to grace our physical or virtual stage, prepared to share their knowledge and insight with attendees.
Our second batch consists of:
Currently the Senior Vice President of Business Development & Fintech for Mastercard UK & Ireland, a position he’s held since 2014, Abraham describes himself as “a proven and successful senior sales leader with experience across a wide range of industries, sectors, and channels.”
Graduating from the University of Northampton in 1994 with a BA in Economics and Law, he worked for nine years at Sainsburys - eventually responsible for banking the company’s revenue and running its ATMs - and then Barclaycard for three years as Head of Client Management. In 2007, Abraham became VP of Client Management at American Express, and then VP and GM Global Supplier Relations EMEA in 2012.
In his current role at Mastercard, Abraham is accountable for the acceptance of all payments and products through all channels, devices, and technologies across UK and Ireland. In addition, he oversees the deployment of innovative new payment tech within the region.
Fraser-Hawkins’ role as CEO, UK Corporate, at Marsh McLennan is the continuation of a long and successful insurance career, which has included being London Sales Director for JLT Group and Branch Director for Willis Towers Watson.
Marsh prides itself on being a company that hires top-tier talent, does work that impacts peoples’ lives, and offers its employees the opportunity to make a difference. This is clearly an attitude that aligns with Fraser-Hawkins’ own values; regarding the insurer’s UK Young Professionals initiative, a support network to help young professionals in their development, he said:
"I am passionate about developing talent and our Young Professional CRG provides a brilliant community for our Young Professional colleagues to discuss key issues relevant early in their careers, as well as an environment to promote the skills, learning and network for success."
Massaro is currently the CEO of Boston fintech Flywire, a role he took on in 2013. He first joined the team in 2012 as VP of Business Development, but it wasn’t long before his entrepreneurial skills were redirected to leading the entire company’s high-growth strategy worldwide.
An expert in domestic and international payments and billing, enterprise technology sales, strategic alliances, enterprise software, SaaS, product management and marketing, and much more, Massaro is a consummate finance professional whose credentials befit the leadership of a prominent global payments fintech.
His previous positions include Consultant at PwC and Product Line Manager at Oracle, and he maintains a Mentor role at startup accelerator MassChallenge. He graduated magna cum laude from Babson College with a BS in Information Systems and Finance.
This event is set to be one of the year's most unmissable. If you want to get leading perspectives on the future of fintech and insurtech, go to Eventbrite and purchase your tickets now.