For a vast majority, banks operate in a black box, in which customers have no knowledge as to how their money is used once deposited. Annual reports lack details of a bank’s operations, banks reveal commercial loan values, but the intricacies are hidden. The credit-worthiness of borrowers and delinquency status of loans are simply unknown. This secrecy has harmful effects, exemplified in the 2008 mortgage crisis and the most recent fraud case at Wells Fargo.
Contrast this to many alternative lenders and challenger banks for whom transparency is considered a guiding principle and core to their business models
Online lender RateSetter publishes its loan book in full, including annual returns performance over the last 5 years. Their lenders have full access to the data behind loans, enabling them to make educated investment decisions. Incidentally, to date, no lender has lost money on loans made through this provider.
Despite calls for increased transparency, banks remain hesitant to give away what they consider their most valuable asset – customer data. However, in light of current scandals, the choice may not be theirs to make in the near future.