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Open banking expected to ease income and expense verification

by Annie Kane13 minute read
Open banking expected to ease income and expense verification

Streamlining the lending process through income and expense verification has been cited by industry as the most popular use case for open banking, a new survey has found.

The finding comes in a new report, The State of Open Banking in Australia, launched by technology provider NextGen.net in tandem with its newly acquired open banking fintech, Frollo.

The report has been launched as the open banking regime expands to include mortgage data of big four bank customers.

It reviews the open banking regime and the Consumer Data Right (CDR) and what the finance industry thinks of its utility and future.


The State of Open Banking in Australia report draws on interviews with several industry leaders as well as survey responses of 161 representatives of the finance industry, including brokers (28 per cent) and aggregators (8 per cent), banks and lenders (22 per cent), fintechs (20 per cent), technology providers (11 per cent) and others (11 per cent) including consultancies. 

According to the report, 71 per cent of industry respondents intend to use CDR data, with more than half (58 per cent) stating that they intend to use CDR data within the next 12 months.

However, only 78 per cent of the finance industry respondents said they were actually familiar with CDR – with brokers found to be 25 per cent less familiar with CDR than the average survey respondent.

Moreover, when asked if they intend to use open banking data, more than three-quarters of brokers (76.6 per cent) stated they currently had no intentions to do so. 

However, when presented with the most popular CDR use cases, for example, streamlining the lending process through income and expense verification, building holistic multi-banking financial profiles of customers, and the digitising of the loan application process, most brokers rated these as being highly valuable for their businesses.

Noting the ‘high value/low usage intent’ broker paradox, chief customer officer at NextGen.Net, Tony Carn, said the issue seems to lie in the fact that brokers do not necessarily see themselves directly accessing and/or dealing with the data.

Mr Carn said this could be attributed to the current broker business model where aggregators – who do intend to use and invest in CDR – are the key providers of broker technology solutions.

For example, the report noted that the appetite for investment is much lower among brokers, with over half (57 per cent) indicating that they do not intend to invest in the open banking scheme at all. 

“This is in line with their business model, as they use the technology provided to them by aggregators. And this is reinforced by the fact that 83 per cent of aggregators do intend to invest, on average, up to $100,000 in the next 12 months,” the report reads.

Mr Carn added: “Looking at the survey results, although individual brokers are not as aware, it’s a different story among aggregators. They are very agile and are facilitating the framework for individual brokers and their businesses to thrive.”

The low take-up by brokers could also be due to the fact that the proposal to enable brokers to receive CDR data is still to be finalised (following consultation on the matter last month).

Given the fact that the vast majority of brokers value the use cases of open banking, NextGen.Net/Frollo suggested that there could be better education on the practical applications of the CDR scheme generally.

Mr Carn concluded: “Awareness of CDR is an issue. Consumer awareness is still pretty low, but we have to bear in mind that legislation only came into effect on 1 July 2020.”

He continued: “The opportunity to streamline credit decisions by using CDR data to reduce unnecessary friction in the application process and speed up the decision process is a game changer for the sector. 

“Use cases, such as income, expense and liability verification, will also help to reduce the costs and risks involved on the lender side, making it a logical and popular use case among banks, lenders, fintechs and brokers and aggregators alike. It also presents a new way for how customers can be sourced and nurtured through their life cycle.

“It’s not just the one moment in time (such as getting a home loan), but the opportunities to get customers ‘fit for finance’ before and after,” Mr Carn said.

Frollo founder and CEO Gareth Gumbley added that more could be done to provide clarity on how to become involved with the CDR scheme, too: “The biggest challenge is giving organisations enough clarity about what it takes to become involved in CDR so that they can assess the costs and return on investment.

“As it stands, there is ambiguity around the process to become an ADR (accredited data recipient). It’s complex, the rules aren’t clear, and for many it’s perceived as a mountain too big to climb.  

“Getting clarity around the costs involved is another factor, and the only way for that to happen is have  more organisations coming onboard and becoming accredited. The more businesses that are accredited, the better, and that’s where the ACCC is putting a lot of its focus. The momentum will come as more businesses are involved and more people start benefiting from CDR and showing that value in a way that creates FOMO (fear of missing out). 

“Lastly, successful participation from data holders is also important. If the infrastructure, organisations and data quality are not good enough, then the use cases will fall over. It’s a matter of getting all the ingredients and  processes right – and delivered in the right order – so that we have a recipe for success.”

He concluded: “Once we have more organisations successfully delivering on more use cases, the ecosystem will be ready for innovation to thrive.”

You can find out more about the findings of The State of Open Banking in Australia report in next week’s episode of the In Focus video series, partnered by NextGen.Net and Frollo.

You can also learn more about how the open banking regime will impact mortgages in the upcoming webcast The Advent of Digital Mortgages, hosted by our sister brand Mortgage Business.

The free, live webcast will hear from Tony Carn and NAB’s Steve Kane as they walk through the ins and outs of what is needed to deliver a truly digital mortgage process.

You can register for the free webcast, here.

[Related: Consultation opens on CDR access for brokers]

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