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6 in 10 lenders want new data sources: Experian

A new survey, including 54 Australian lender leaders, has found that 60 per cent wish to leverage new data to determine credit risk.

Information services company Experian has published its inaugural Risk Radar report, highlighting a shared perspective among Australia’s senior risk leaders and non-bank lender decision-makers for industry modernisation. 

The report – which includes survey responses from 54 non-bank lender decision-makers collected by research and advisory company Forrester alongside insights from six of the country’s “most senior risk leaders” – noted that improving regulatory compliance was the top credit risk priority. 

According to the data, 46 per cent of the risk lender respondents felt this was critical and 31 per cent deemed it to be a high priority.

Updating credit policies was also a key point, perceived by 41 per cent of the respondents as critical while 24 per cent felt it as a high priority. 

However, a contemporary approach to embracing new data sources and technologies was also a consistent position. 

According to this latest report, 60 per cent viewed that leveraging new data sources was either a critical or high priority, while 70 per cent believed modernising legacy systems was also a critical or high priority for the industry. 

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On the notion of leveraging emerging technologies, including artificial intelligence, 31 per cent of respondents believed such steps were critical, while an additional 26 per cent felt it was a high priority. 

Experian general manager of decision analytics, Australia and New Zealand, Mathew Demetriou said of the report that he believed lenders are having to stay ahead of, and respond to, a changing regulatory landscape. 

“For instance, the government announced earlier in the year the potential to wind-back some of the more onerous lending regulations, while more recently, the [Reserve Bank of Australia] signalled a tightening of mortgage lending criteria to cool the property market,” Mr Demetriou said. 

“Lenders may find themselves caught between a rock and a hard place. Lenders want to do all they can to help borrowers achieve their financial goals and avoid facing hardship or defaulting on loans. However, they must also balance this with the need to remain competitive.”

This point of caution is one raised in the Risk Radar report that cites figures from a three-month survey, accomplished in tandem with Forrester and also published in October, that suggests 61 per cent of Australian lenders acknowledge that a poor decision could place their client in financial hardship. 

Furthermore, this same survey found that two-thirds of Australian lenders believe they are turning away creditworthy customers because they lack data from “traditional and alternative sources”. 

“There is a vast array of consumer data that is now available to modern lenders beyond traditional banking, credit bureau and employment information,” Mr Demetriou added. 

“This includes digital transaction, [buy now, pay later] and subscription data, amongst others. Therefore, we are seeing growing demand for systems that can help lenders to analyse this information to make informed, actionable decisions.”

This introduction of technology could also appease client expectations, with Experian stating that a survey of 1,000 Australian consumers released earlier this year concluded that 75 per cent believe home loan approvals should occur within three days, while 50 per cent expected approval within 24 hours.  

“Decisioning technology that applies automation, data and analytics at the point of customer acquisition, can not only improve the speed of approval for a better customer experience, but also ensures responsible lending obligations are met,” Mr Demetriou continued. 

“This helps to reduce the risk of defaults and likelihood of hardship down the track.

“Sophisticated credit risk models using new technology can ultimately help improve customer management, reduce credit losses and minimise fraud.”

 [Related: Expand comprehensive credit reporting, say lenders]

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