Consumer services

Banks will use consumer data rights to assess loans this year

Currently it uses a “screen-scraping” process to obtain data, but expects banks to start later this year to replace that process – or the tedious manual review of bank statements using of human credit teams – through the process regulated by the Consumer Data Right (CDR).

“CDR is reaching this tipping point,” says Brenton Charnley, CEO of TrueLayer Australia and New Zealand. “We’ve been pushing that rock up a hill for the past two years. But the practical use cases we talked about for putting CDR in the hands of the consumer will happen within the next six months.

CDR was first recommended by David Murray’s Financial System Inquiry in 2014, then by the Productivity Commission in 2017. It was activated in July 2020; figures on API calls (which track usage of the scheme) are not published, but are thought to be very low – possibly 30 million calls in almost two years.

If Labor wins the May 21 federal election, it will put in place historic competition policy after four years of design work and tough investment by the banks.

Experience from the UK – which introduced open banking two and a half years before Australia – suggests usage will increase when the alternative screen-scraping method is phased out. Under a European regulation known as PSD2, the UK disabled screen scraping in March 2020; calls to APIs in the UK have since jumped from 12 million per day in February 2020 to 24 million per day in February last year, to 31 million per day in February this year, or 860 million calls for the month.

Screen-scraping companies such as BankStatements – part of Illion – or Yodlee are done by sharing passwords, raising questions about security, while consent, privacy and data standards are not not regulated. The scraping process is also expensive: banks or brokers can be charged up to $10 per loan per customer. Open banking should deliver higher quality data at less than a tenth of the cost.

“This is about moving from a compliance exercise to an opportunity to deliver a cleaner set of data,” said Mike Page, CEO of MogoPlus for Asia Pacific. “This is important as we look to add insights to help the emerging customer experience – like instant decision-making, straight-through processing or various nudges lenders can provide to consumers.”

Once it ingests data through TrueLayer, which connects to banks, MogoPlus takes five to 15 seconds to deliver customer information tailored to the credit framework set by particular lenders. It uses the full range of income, expense and liability data from individual and joint accounts.

The Australian Competition and Consumer Commission, which regulates the scheme, is putting more pressure on banks to ensure the quality of their data is as good as that accessible via screen scraping. It recently launched a new dashboard on the CDR website showing bank availability and speed; ANZ Plus and Commonwealth Bank are among the top underperformers.

TrueLayer’s Mr Charnley said consumers’ right to data should speed up home loan applications made through brokers and reduce costs for customers. “It’s inefficient to download a PDF or use a screen-scraping product and provide it to a broker who then goes back to the lender: there’s so much fat in that value chain,” he said. declared.

While the UK is ahead of Australia in terms of banning screen scraping and pushing volumes through its open banking regime, the Australian version could have more impact, given that it will extend to the entire economy, including telecommunications, energy and super. Australia has also imposed standards to ensure consistency of datasets.

However, it remains unclear how much payment volume – a major driver of open banking volume in the UK – will pass through Australia’s open banking regime, as the government needs to legislate to add “initiation” power. to action” on the diet.

Last week, APRA chairman Wayne Byres said the establishment of consumer data rights and open banking in Australia “is a clear example” of regulation providing “a stamp of approval that reassures customers of the reliability of a company or product, enabling new markets and services”. thrive in the face of information asymmetry”.

Mr Page said the scheme should be seen as an infrastructure rather than a product for customers. “People don’t wake up in the morning and say they want to use open banking APIs, but they say I want less friction on a loan application journey,” he said.