By Oliver Smith on Friday 27 March 2020
One proof-of-concept has already been built by the industry.
Voices from across the fintech industry have come out calling on the government to use the plethora of open banking data to dramatically increase the speed of its Self-Employed Income Support Scheme.
Chancellor Rishi Sunak last night announced a cash grant for the self-employed of 80 per cent of their profits, up to £2,500 per month, to support sole traders during the coronavirus pandemic.
However, concerns have been raised as to the speed at which the system is being rolled out (first payments aren’t expected until mid-June) and those who will fall through gaps in the system (those who have yet to file annual tax returns).
“Waiting until June to receive 80 per cent of their usual profits and relying on universal credit (which could take 5 weeks to come through) in the meantime will leave many self-employed people vulnerable.”
Prill called on the government to speed up the process by working with “financial institutions that have the necessary data at their fingertips”.
Coconut’s CEO Sam O’Connor flagged the new system would likely see many workers with less than three years of trading history: “penalised by the government as they may only have partial historical earnings to use and will therefore not receive appropriate support.”
O’Connor said his accountancy app for self-employed workers would be launching a free self-assessment web tool on 6 April built on Coconut’s technology for freelancers to analyse and categorise their income and expenses data for up to 24 months from 20 major UK banks.
Some have gone even further. Last weekend a new web service called Covid Credit was built and launched by a consortium of fintechs including Credit Kudos, Fronted, 11:FS, Capital on Tap, Mazuma, SeedLegals and TrueLayer.
Covid Credit uses open banking data to help self-employed workers evidence their loss of income due to coronavirus by connecting their historic banking data.
Freddy Kelly, CEO and founder of Credit Kudos and collaborator on Covid Credit said: “We think this could play a major role in delivering these remedies and doing so potentially faster than using tax data alone.”
Despite the growing evidence that the scheme could be implemented faster and could cover more people by using open banking data, it's unlikely to happen any time soon.
Chancellor Sunak made particular mention in his announcement that: “To minimise fraud, only those who are already in self-employment who have a tax return for 2019 will be able to apply."
While open banking has been a buzzword among government ministers for the last two years, when the technology could actually be harnessed for good, those same ministers seem unwilling to use it.