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Lending sector is ‘biggest opportunity’ in open banking: Frollo

While the government focuses on fixing underlying issues in open banking, opportunities in the sector are expanding.

According to Frollo, an open banking provider, as per the fourth edition of its State of Open Banking report, the number of businesses registered to utilise Open Banking data has grown significantly over the past 12 months.

The data reveals that registered businesses have nearly doubled, increasing from 77 to 142.

Lending is expected to be a significant driver of open banking, especially in the short term as businesses seek use cases with a clear return on investment (ROI).

According to Frollo CCO Simon Docherty, lending represents the “biggest opportunity” in open banking.

“Not only does Open Banking provide customer benefits in lending, but there’s also a clear and measurable return on investment for businesses that use Open Banking data, thanks to time saved in processing and better decisions made from high-quality data,” Mr Docherty said.

“Larger banks most likely have the budget and resources to launch Open Banking use cases and start getting returns on this investment,” says Docherty.

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“When larger banks actively lead the charge, it helps other bank CEOs and boards prioritise CDR-driven projects, knowing they need to remain competitive.

“It’s also clear that larger banks’ active use of CDR provides the scale to drive crucial customer adoption and awareness and that customer adoption will lift the entire ecosystem.”

Banks and open banking providers together account for almost half of the Accredited Data Recipients (ADRs), with payments and lending businesses following closely behind.

In addition to major banks that have already launched open banking, such as CBA being the first to implement open banking for brokers, mutuals have also joined the trend, including Beyond Bank and P&N Group.

Mr Docherty acknowledged that all banks have had to make “substantial investments” to comply with Data Holder obligations.

For smaller banks, this has strained both their resources and finances, meaning it’s unsurprising that they have been somewhat slower to implement open banking.

However, Mr Docherty remains optimistic about the uptake in the banking sector, stating, “Once banks have access to the quality of data available, there are many exciting ways they can use that data to improve systems, processes and customer interactions.”

Australians want open banking

While the majority of Australians remain unaware of open banking (55 per cent), a survey conducted by Frollo among over 1,000 people revealed younger generations are more likely to switch banks to gain access.

Open banking has emerged as the “preferred method” of sharing financial information, especially in the mortgage application process, the survey revealed.

Head of broker partnerships at NextGen Renee Blethyn, highlighted that the Trusted Adviser model is simplifying the process for financial advisers, mortgage brokers, and accountants to access open banking data for their clients.

Innovators like AMP Advice, Finsure and Sherlok have embraced this model to bring open banking-powered services to their network.

Ms Blethyn noted that brokers are saving time, and gaining insights more rapidly, and their clients prefer the streamlined, less time-consuming, secure process.

The low barrier to entry through the TA model, security, and better data make open banking an exciting alternative for mortgage brokers, she added.

[Related: Development of trust key to open banking]

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