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What is open banking? According to Basiq’s CEO and founder Damir Ćuća, it’s essentially technology that enables businesses to be able to access their customers’ financial data.
“Your own personal banking data that you see when you log on to your internet banking, you see accounts and transactions and all of that, that data is incredibly valuable, particularly when it comes to lending,” said Ćuća.
“Because that data is so valuable and so useful, what open banking does is [enable] software developers and other businesses to be able to access that data. And that’s effectively what open banking is. And once they’ve got access to it, they can crunch it, they can give you the charts, they can help you in your savings goals, they can use it to make a lending decision.”
Brokers have an opportunity to take advantage of this data to map lending options.
“Brokers, they’re always looking for tools on how they scale. How do I kind of leverage tools so I can service more customers or I can kind of help them get a better loan and so forth. You can argue that brokers are just data brokers in their own way,” he said.
“They’re asking customers to say, give me all of your data. And then I’m going to go and try and correlate your data with different lenders in the market. And based on that data, I can work out who’s more likely to give you a better offer or who’s likely to say yes and likely to say no.”
Despite the benefits it can bring, there are issues with open banking that are keeping brokers from utilising it. Christian Stevens, CEO at Flint, said that his company’s brokers don’t use open banking.
“While open banking is gaining traction, there is still a way to go before it reaches its full potential in the industry. Many brokers are beginning to recognise its benefits, but widespread adoption is still in progress,” he said.
“There are a few barriers, such as concerns over data security and the initial set-up costs, which may deter some brokers from fully integrating this technology. However, as awareness grows and the advantages become more apparent, I believe we will see a more comprehensive adoption across the sector. Education and demonstration of successful case studies will be key in driving this uptake.”
Fine-tuning may be necessary before widespread adoption is reached. Despite his hesitance about the systems, Stevens believes there are some positives it can bring brokers.
“Open banking brings lots of benefits to brokers. Firstly, it significantly reduces the amount of paperwork and manual data entry, saving time for both brokers and clients. This leads to faster loan approvals and a more seamless client experience,” said Stevens.
“Additionally, the transparency and accuracy of data improve risk assessment and decision making. Brokers can offer more personalised advice and product recommendations based on precise financial data, enhancing client trust and satisfaction. Open banking can facilitate better compliance with regulatory requirements by providing verifiable and consistent financial information.”
Open banking is on the rise, as according to FinTech Australia, numbers have almost doubled in recent times: “The number of businesses registered to use Open Banking data has grown significantly in the past 12 months, almost doubling from 77 to 142. And this growth is visible across the board.”
While it has potential in the broking space, open banking may need time to find its feet. The power of data shouldn’t be understated and those looking for an edge may find plenty of positives in these systems.
[Related: Lending and broking top open banking use cases]
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