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Speaking at an IQPC open banking webinar, Michael Lambrellis, head of technology strategy and architecture (core banking, payments, operations) at ME Bank, said the availability of a customer’s transaction data through the open banking regime would enable organisations to manage a customer’s banking through one application.
The availability of transaction data would not only enable providers to offer additional services such as managing a customer’s spending and savings goals, but it would also allow them to examine a customer’s credit risk. This could enable them to offer discounted rates for home loans or credit cards, or better savings rates for customers with a good savings record.
Moreover, Mr Lambrellis said the regime could change the nature of the home loan market, where customers have traditionally been “very sticky”.
“Once you’ve got them you’ve probably got them for the next 20 years,” he said.
“But imagine a world in which that’s no longer the case. Imagine a world in which someone may originate with you for their home loan and decide in 12 months’ time that, actually, they can get a better deal somewhere else.
“All of a sudden there are implications in terms of our capitalisation and all those kinds of financial underpinnings of the industry that will have an impact not just on us but also on the regulatory regime around this.”
Explaining further, Mr Lambrellis said that open banking could enable lenders to understand the credit risks associated with the borrower and fast-track the home loan application process, and perhaps make home loan origination a “low-touch, or even possibly a no-touch, operation”.
“Then all of a sudden you’re shaking up an entire market because home loan customers aren’t as sticky as they were,” he said.
“That will have ramifications in terms of things like how organisations respond to try and hold on to customers.”
Mr Lambrellis provided the example of the energy and utilities sector, where retailers began offering bundles and lock-in period benefits in an attempt to retain customers when they began switching retailers or energy providers, adding that the barriers to switching providers were low.
“It will be interesting to see how that might unfold in the financial services industry,” he said.
While it could take some time for the implications of open banking on lending to become evident, Mr Lambrellis advised the industry to be prepared and “be agile”.
“I think if technology has taught us anything, it’s that we don’t know exactly how it’s going to be used,” he said.
“Once we’ve created the capabilities, how clever people decide to use it can really shake things up.”
The open banking regime officially launched on 1 July with the launch of the consumer data right (CDR). The CDR is currently limited to the sharing of data for deposit and transaction accounts, and credit and debit cards. The sharing of data relating to home loans, personal loans and joint accounts will commence from 1 November 2020.
It is currently only open to major bank customers, with smaller authorised deposit-taking institutions to opt in over the next 12 months. But several non-major lenders, including ING, have commenced releasing product reference data to open banking developers.
The Australian Competition and Consumer Commission is currently consulting on expanding the rules of the CDR to enable more financial services professionals such as mortgage brokers to receive consumer data with consumer consent.
The current rules do not allow the disclosure of CDR data by an accredited data recipient, such as a bank, to other parties that the consumer may wish to share their CDR data with, such as mortgage brokers.