The Association of Mortgage Intermediaries (AMI) has raised concerns that open banking could have a negative impact on vulnerable mortgage borrowers.
In its latest Quarterly Economic Bulletin, the AMI warns the technology may not necessarily take into account factors that could be relevant to the advice process, such as age, mental or physical infirmity, and emotional and familial considerations.
It also said the technology heightens its concerns over whether online decision trees - automated, and then branded advice - can constitute fully regulated advice.
Due to be introduced early next year, open banking will enable financial institutions to share customers’ data through a set of codes that allow different technology platforms to talk to each other, known as application programming interfaces.
It will allow consumers to manage all their retail banking accounts with multiple providers through a single digital app, giving them more control over their funds and allowing them to make better product comparisons.
The AMI said that in theory open banking will allow customers to compare specific mortgage products from across the market, "tailored to their affordability, on a quickly, accurately and personally underwritten basis".
It will also enable mortgage underwriters to make more accurate affordability assessments, as they will have access to customers’ current account, savings and other debt commitments.
But the AMI warned that so-called robo-advisers are able to make recommendations that are not necessarily appropriate because they fail to take into account a customer’s full circumstances, including non-financial plans such as marriage, children or divorce.
It also expressed reservations about where the responsibility for advice and liability would lie in a post-open banking world, alongside fears over the potential for personal data to be compromised by cyber-crime.
The AMI said: “Open banking is undoubtedly a positive step forwards for consumers and the industry. However, as with all progress, we would urge the regulator to be mindful of unintended consequences that could have a detrimental impact on consumer finances.”
Nick Green, broker at Coventry-based Alternative Estates and Financial Services, said he thought the concept of open banking sounded “pretty dangerous”.
He added: “Do you really want to share your data between lenders? I personally wouldn’t. I’ve nothing to hide, but it is giving your personal data to everyone.
“It is not what the lenders are going to do with it; it is the fact that all your information is being shared everywhere.”
He added that credit agencies already have too much power, and if people have problems with their mobile phone provider it can affect their credit rating, and hence their ability to take out a mortgage.
simon.allin@ft.com
