Responsible lending challenges will ease under open data

Banks have the most gain from open banking and comprehensive credit reporting particularly in addressing the challenges around responsible lending.

This is the assessment of MoneyPlace CEO Stuart Stoyan (pictured). The caveat here is that banks will still need to have a solid customer value proposition.

Stoyan was speaking at the annual Australian Retail Credit Association Conference in Brisbane recently, an event he described as the “Disneyland for credit geeks”.

For the fintech CEO, it has never been a better time for banking, despite the revelations unearthed from the royal commission. He believes that initiatives such as open banking and comprehensive credit reporting will position the sector to re-engage with their customers as well as address regulatory challenges particularly around responsible lending.

Indeed, banks have come under scrutiny with regards to assessing the expenses of their customers during the lending process with an over-reliance on measures such as the Household Expenditure Measure (HEM) benchmark.

“Forget about HEM. Open banking and a CCR framework will help banks better verify and assess income, expenses and liabilities of their customers. Banks can make even better decisions given they have access to transactional data,” Stoyan said.

In fact, MoneyPlace is already using transactional data to verify the income details of its customers. It also helps the business meet its responsible lending obligations.

“We are also working with our partners to help them understand their customers’ transaction data and what products their customers may be using with other institutions,” he said.

A brave new world

In this “Brave new world of open data” – the theme of his presentation, Stoyan also sees banks well-positioned to make sharper decisions and improve their productivity.  

The ability to access more data, will enable banks understand behavior patterns – such as high spend on gambling – and even move to transactional categorization where ‘flags’ can be used to alert both the consumer and bank to certain expenditure items.

Productivity improvements will be driven from the drive to automation, faster approvals which often lead to increased conversion rates, streamlined process and reduced fraud.

Here Stoyan acknowledged the high-public data breach cases such as Facebook where email address and phone number of nearly 30 million accounts were released

But for the MoneyPlace founder, such events are now assumed as “collateral damage” from an open data world but can be effectively managed.

“Yes, it was truly horrible and there will be remediation costs and expenses for businesses who beach data security, but did anyone stop using Facebook or social media? There is a kind of acceptance that there will be collateral damage from data losses,” Stoyan said.

Here, he believes open banking will be more secure than current practices around data security. For example, data can only be shared with accredited third parties.  

Open banking has been developed in the spirit of competition. If your proposition is not good enough, you won’t survive

“It also gives you a secure portal do that and eliminates the need to share usernames and passwords,” Stoyan said.

Importantly he believes that the framework provides the ability to revoke authority giving consumers better control with who they share their data with.

Stoyan who was the former Chair of FinTech Australia also dismissed broad industry concerns that open banking will give fintechs a free ride.  Instead he sees an environment of partnerships and even the ability for banks to leverage their customer data to create “super appss” and emerge as the primary relationship holder for their customers relationship with money.

He warned, however, that banks need to ensure they remain relevant.

“Open banking has been developed in the spirit of competition. If your proposition is not good enough, you won’t survive.”

 

 

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