How open banking will turbo-charge lending in Australia

Lending will be one of the first use cases to drive adoption of open banking under Australia’s ground-breaking Consumer Data Right.

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The success of open banking in Australia will be measured by the choice, competition and the confidence it delivers to consumers. It is, after all, the consumer’s data right. Based on TrueLayer's experience in the UK and European markets, lending will be one of the first use cases to drive adoption of open banking under Australia’s ground-breaking Consumer Data Right.

Fintech has already changed the business of lending irreversibly

Neo-lenders have built digital workflows capable of consuming, enriching and analysing your bank data to verify your income and expenditure, and assess your ability to afford the loan in accordance with responsible lending criteria. You can instantly consent to your bank data being shared digitally with a lender, rather than having to fill in forms and provide supporting documentation like payslips and bank statements. Increasingly younger Australians are shunning credit cards, preferring the convenience of buy-now-pay-later for retail purchases both small and large. Now the new kids on the neolending block — early access to earned wages — are integrating directly into payroll systems and using instant payments technology. Lenders with digital data-led processes can approve borrowers in mere seconds for something like solar panels and just hours for something like a mortgage. Consumers are learning to expect on-demand access to credit that also delivers a brilliant customer experience.

Open banking will deliver even more powerful benefits for the borrower and the lender

Open banking will turbo-charge how lending is done in Australia, by bank and non-bank lenders, by removing some of those hurdles inherent in the status quo and delivering three knock-out benefits:
  1. Verification. Instantly knowing whether a person owns a bank account, and confirming their identity, will allow lenders to make risk assessments faster.
  2. Financial insights. Data will paint a complete picture of a person's financial situation, giving lenders a real time risk monitoring tool to alert for potential problems, such as a borrower missing a payment.
  3. Instant bank payments. There will be no more waiting for money to appear after clunky payments processes. The door will open to third party action initiation with all the transparency and cost reduction that brings.

The true meaning of flexible lending

The uniqueness of open banking in Australia is the proposed five tier access model, which bakes flexibility for lenders into the open banking regime, without requiring them to go through the four-to-six month process of becoming fully accredited. For example:
  1. A non-bank lender offering buy-now-pay-later can use the insights model to confirm that a person owns a bank account.
  2. A mortgage broker can take advantage of the trusted advisor model in order to provide a better customer experience.
  3. A neobank offering personal lending products can start on a higher tier, such as being sponsored, to access live bank statement data.
For all of these parties, choosing to partner with a platform like TrueLayer is the smart first step to access the data they need under the Consumer Data Right. TrueLayer is well placed to provide guidance and access to open banking data via its data and payments APIs and to help you through your CDR journey.Down the track, it’s always possible to level up, including moving to full accreditation.
Learn more about how TrueLayer can help you become a sponsored representative or fully accredited in this guide to accreditation.  
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