Open banking first movers reveal CDR benefits

Initial feedback from lenders and aggregators using open banking has highlighted the benefits of the technology and how it is helping modernise the mortgage writing process.

Speaking at NextGen’s sunset drinks and discussion event at its North Sydney office this week, the executive general manager for the consumer data right, Paul Franklin, and representatives from Beyond Bank, Finsure, the Mortgage & Finance Association of Australia (MFAA) and NextGen, outlined their initial experiences of utilising data from the consumer data right (CDR) scheme.

Nick May, the general manager, customer experience at Beyond Bank, highlighted that the bank was utilising open banking for its personal finance management (PFM) app, Beyond Bank+, which was helping customers see all their financial information in one place and help them meet their budget and financial wellbeing goals.

He added that the bank would also be able to harness the open banking functionality to utilise a customer’s financial passport and embed it into the lender’s loan origination software to provide serviceability for mortgages (via first party as well as through the broker channel).

The end intention is that information from the app would be able to pull through to feed into the mortgage application form.

“It is going to offer some real hidden value to our customers because it’s going to better our time to yes. The ability to serve customers and the ability to collate that data — and not have to get customers to go away and do it — means that CDR and open banking is go to offer a lot of value, not just for our efficiency as a business, but provide ease for customers as well,” Mr May said.

Indeed, NextGen’s chief customer officer, Tony Carn, said that using open banking data in mortgages provides “a huge opportunity” to remove fiction, time and cost. According to NextGen, lenders will start consuming CDR information in their application processing from the first quarter next year when the first lender switches it on.

Mr Carn commented: “If we look at the origination industry in Australia, for mortgages, banks are probably paying between $4 billion to $6 billion a year just processing applications, and that’s before any other origination costs.”

He added that completion rates in loan applications were also higher when using open banking, revealing that around 50 per cent of mortgages utilising screen scraping were completed, whereas, in CDR, the completion rates for consumers were climbing past 70 per cent.

“So I think it just unlocks so many factors going forward: safety, security, reliability, and customer trust,” he said.

Open banking a drawcard for brokers

Broking groups have also begun testing open banking under the trusted adviser model, which came into being in February 2022.

Aggregator Finsure became the first broking group to become accredited under open banking and has been building tech to enable its brokers to access their clients’ data when consent has been given.

Julian Wills, Finsure’s head of governance and risk, said the technology helps eliminate the back and forth between a broker and a consumer when it comes to documentation collation and meets a growing consumer expectation for digital solutions.

He added that open banking also helps protect brokers and aggregation from fraud.

Mr Wills explained: “Open banking is a single source of truth. Ten years ago, you would have to collate all [of] a client’s bank statements and payslips etc but now it’s just tick a consent box and off you go …

“We can gather all of that documentation now with open banking, and because it comes from that original source — there can be no tampering with it. There is zero chance of a problem with the documentation. So it really rules a line from the fraud perspective for the broker — they know the consumer can’t tamper with their financials,” adding this has a large compliance benefit for the aggregation group, too.

Anja Pannek, the chief executive of the MFAA, told delegates that giving brokers access to open banking under the trusted adviser model could only help drive up the value proposition of the channel.

“We see CDR and open banking as a real game changer in the broking industry … there is still a fair amount of friction in the system when it comes to data collection and that creates friction for customers and brokers. So we see there’s a game changer in that regard,” she said.

“We all want answers quickly in life. We want solutions to be simple and the service proposition of a broker is anchored in trust. So, we see the broker being able to avail themselves as a trusted adviser in that environment and help their customer make really great decisions that are actually data informed.

“We know brokers play a fantastic role when it comes to financial literacy and education … but they can now also help educate customers on open banking and what they need to know. But it doesn’t stop with a broker. I think it’s actually all of our roles and responsibilities to work on educating [consumers] and leverage the system for the benefit of everyone, in particular customers.”

By providing education and awareness on the benefits of open banking and the transparency it providers customers, the MFAA CEO said that brokers would continue to be the trusted adviser of choice for mortgages.

She suggested that it could help drive broker market share from its current level of around 70 per cent to over 80 per cent in the next five years. 

In closing, NextGen’s Mr Carn said he believed open banking would provide greater harmony across mortgage distribution.

“It’s just about having a usable, repeatable solution that everyone can tap into and benefit from,” he said.

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