The open banking regime was recently extended to allow customers of the four major banks to share their home loan and mortgage offset data to accredited recipients under a new stage of the Consumer Data Right (CDR).
The expansion of the regime, which has been operational by the major banks since 1 July 2020, adds to the number and type of account data that consumers can share under the CDR.
The product lead of the Finder app, Ben Nicholls, recently addressed the challenges the CDR and open banking regime could pose to brokers and their commercial model of trail commission.
Speaking during a webinar panel discussion on the future of mortgage lending, hosted by Finder, Mr Nicholls said that open banking and the CDR tool could not only enable a proliferation of refinance activity among borrowers, it could also drive borrowers to approach lenders directly for refinancing rather than use the services of a mortgage broker as the conduit.
“A big chunk of [brokers’] back-book portfolio might [go] directly to lenders because they’ve got this open banking and refinance platform,” Mr Nicholls said.
However, the industry also believes that the CDR and open banking could hold opportunities for brokers.
CEO of Choice Aggregation Services Stephen Moore told a recent Mortgage Business webcast about The advent of digital mortgages that the future of the broking industry and financial services would centre around data and digital tools.
“Brokers are really in the box seat when it comes to the future with open banking because open banking is ultimately about providing a better outcome for consumers by driving competition,” Mr Moore said.
“As we know, brokers are the key drivers of competition. We also know that brokers know their customers more than anyone else across the value chain in financial services, individual personal circumstances, their family, their aspirations.
“What’s missing now is that rich data that is typically being monopolised by the particular provider.”
According to Mr Moore, the ability to access client data (with their permission) could provide brokers with an advantage because they can provide further insight and advice for their clients.
“The secret ingredient is insight,” Mr Moore emphasised.
“What that means is better advice, better meeting of best interests duty when it comes to customer needs, of course, and at a provider level, being able to better fine-tune pricing product specifically for that customer.
“So, a real win for customers.”
Mr Moore also said that the CDR and open banking regime would act like an “extension” of the broker relationship, enabling brokers to provide assistance with the loan transaction.
“It extends that interaction right up front in the process,” Mr Moore said.
For example, access to consumer data would enable brokers to implement a plan that would guide borrowers on how they could save for a mortgage, according to Mr Moore.
“That’s saying that, ‘when you’ve saved, I’ll help you get to that stage’,” he explained.
Elaborating further, Mr Moore said that after the loan has been established, brokers can track progress more effectively, and fine-tune or change the loan structure as required for the client.
“Having the data to do that means the broker is more informed to provide an even better outcome for customers,” he said.
Mr Moore noted, however, that more work needs to be undertaken to ensure that brokers can access their clients’ data, with their permission.
Indeed, the Australian Competition and Consumer Commission (ACCC) recently launched a consultation on expanding the CDR rules to enable more financial services professionals, including brokers, to receive consumer data with consumer consent.
Following consultation with industry, the ACCC noted that it was “critical” that a broad range of recipients were able to participate in the CDR scheme for it to “achieve the competition and innovation objectives of the regime, and for the CDR to support Australia’s digital economy”.
However, Mr Moore warned that changing and adopting to the regime would require time, adding that brokers should not expect a “quick win”.
“It’s going to take time for adoption, as we’ve seen in other markets globally, but it is a fantastic direction, and I think brokers really are in the box seat for it,” he said.
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.