How open banking will be pivotal in lending

  • By Penny Pryor

Open banking has the potential to rapidly transform the mortgage industry, with innovative use cases greatly improving the experiences of customers, lenders and mortgage brokers alike. 

Delegates at the recent RFi Group Australian Mortgage Innovation Summit heard how new innovations could redefine relationships in broking and banking. 

Indeed, the panellists see the open data initiative as being pivotal for the industry. 

Chief customer officer at NextGen.Net, Tony Carn, chief executive officer at Smartmove, Darren Little and managing director, consulting at RFi Group, Alex Boorman, appeared on a panel on the topic, which was moderated by head of client insights at RFi Group, Anna Shaw.

“What excites us about open banking coming in is it’s going [to] help us with making that frictionless transaction …and allowing more time for our team to actually focus on the advice they’re giving the customer,” Little told the panel.

Open banking, and the sharing of information that consumer data right Rules (CDR) allows, should be able to reduce the pain points in the onboarding process for new mortgagees.

“Using open banking data to inform an application is really important because it is a big friction point now where we see an applicant declare one thing and a lender then pores through a bank statement or other payslips and they assess it differently,” Carn said.

“Open banking enables that data to inform an application and say hey look I’m declaring this in my application, my data says this but here is a clearly enumerated reason as to why the difference is.”

“And that in itself can remove a lot of information requests.”

This is especially important because of how impactful a consumer’s onboarding experience can be for their ongoing relationship with a lender.

Importantly a good onboarding experience has a big impact on advocacy levels. 


“We know when we ask consumers to reflect upon how they feel about their mortgage lender and their broker the application experiences that they have really determine how they feel, and the memory of an application experience good or bad really lasts,” RFi Group’s Boorman told the panel.

Having greater access to secure customer data, lenders will be better positioned to provide better pricing, while brokers will also be better placed to provide tailored services to their customers. 

“If a consumer has had a good application experience, even years after that experience, their advocacy is higher, their satisfaction with their loan is higher, [and] the number of products they hold with their lender is higher.”

Little agreed that a positive, or negative, application process can have a lasting impression and was something they often picked up in their annual surveys of their client base.

“That’s why we as a business we’re really focussed on using banks that actually make it easier to do business with them,” he said.

A smoother onboarding and application process could, and should, help with customer retention, particularly if the refinancing process becomes easier. 

“If it’s going to become easier for customers to switch there is no real reason why they would feel they have to stay with that lender anyway,” Shaw said.

Importantly, by having greater access to secure customer data, lenders will be better positioned to provide better pricing, while brokers will also be better placed to provide tailored services to their customers. 

Indeed, open banking comes at a time when recommendations from the ACCC’s home loan inquiry - that ais to ensure consumers have access to better priced loans - is set to be introduced. 

“Certainly, on paper, open banking should allow lenders to make faster and more informed lending decisions This should result in consumers being able to access more personalised and suitable products, Boorman said. 

“This has to be good for the market and consumers.”  

And while open banking reduces the barrier to switching, the jury is still out on whether consumers will make that switch.  

Little also sees scope for brokers to provide tailored services and products adding that the introduction of the Mortgage Brokers Best Interests’ Duty combined with open banking will really enable brokers to act in the best interests of their clients.  

In terms of how innovation under open banking will unfold, Little spoke about the potential for brokers to provide pre-approved loans based on a person’s fluctuating income. 

While it is a “pipe dream”, Little sees scope for this type of innovation to be introduced.

By having better access to customer data, Little also sees scope for automatic valuations as well as the ability to help customers more “holistically” on their home journey by supporting them through saving and budgeting tools. 

One of the challenges will be consumer awareness and understanding of open banking. Current RFi Group research reveals that even if survey participants have heard of the term, very few really understand what open banking is.

“Once we explained the term to them that's where we get a much higher level of interest and appetite,” Boorman said.

RFi Group found that once they understood the concept, around one third of consumers became interested in the notion, and that number rose to half of consumers under 34.

This younger cohort, who is expected to make up the early adopter sector, is much less concerned about security and privacy.

“They are also more excited by some of those propositions that will emerge in an open banking environment,” Boorman said.