Promoted by OnDeck.
Comprehensive Credit Reporting (CCR) will turn borrower credit information into a tool brokers can use to grow their business and win clients for life.
Brokers have been watching the evolution of Australia’s Comprehensive Credit Reporting (CCR) regime for a number of years,and in particular since it was first introduced to the local lending market in May 2014.
The Federal Government’s 2017 decision to mandate participation from the ‘Big Four’ banks means brokers are now finally set to enter this new era. While the Treasury’s industry consultation process is ongoing until 13 June,the intent is for the banks to share 50 per cent of their data within 90 days after 1 July.
Brokers will be operating in a fully-fledged CCR environment by the time the last tranche of data is made available by late 2019. The question is: can brokers use this shift as a catalyst for business and channel growth?
OnDeck’s experience in Australia and the US shows that the answer is ‘yes’.
However, not for the SME sector in Australia. Here’s why.
Champions of choice
CCR requires the reporting of a much deeper and richer suite of borrower credit information. Rather than being limited to negative events - like defaults – credit reporting will now include positive data points like account opening dates, amounts borrowed, type of credit applied for and repayment histories.
When taken together,this data could give SME business lenders like OnDeck the flexibility to use a more positive picture of a client’s credit profile in future, potentially resulting in more fine-tuned lending decisions.
Critically, this data should be available to all lenders, stimulating competition. But it’s not. Sadly, CCR does not currently apply to SMEs.
For a long time, brokers have been concerned domination by just a few lenders could erode their core value proposition, which is to provide choice. Business borrowers in particular have complained of being underserviced in the current market;OnDeck’s latest Small Business Owners Survey, conducted by YouGov Galaxy, showed 55 per cent had been rejected for finance.
By levelling the data playing field, CCR would open the door for innovative new players like FinTechs and peer-to-peer lenders to challenge the banks in the years ahead.
While alternative finance providers like OnDeck have already seen growing awareness and interest from local business borrowers for example, 33 per cent of SME’s who want additional finance said they would consider an online lender, by including SME in CCR could support this sector’s important innovation and growth.
OnDeck supports the extension of CCR to the SME market.
If this were to happen, what’s certain is that borrowers in a more multi-faceted and fast-changing market would need a trusted broker to assess their finance needs and navigate the wider range of products and providers. As choice grows, astute brokers could reinforce their role as champions of lending choice.
Advocates with leverage
Thanks to a larger pool of data, CCR could make it possible for brokers to leverage good borrowing behaviours to advocate strongly for their clients. In a price-for-risk market, this could mean obtaining a better rate or loan term.
For clients with more challenging credit histories, CCR could enable brokers to work with a fuller picture of a client’s position, and play a role in improving that financial picture over time or providing more appropriate lending options.
As a result, brokers would naturally become advocates of choice for borrowers, ensuring ever-stronger relationships with clients, potentially even becoming clients for life.
This would take brokers beyond just transactional broking. As borrowers seek guidance, brokers could position themselves as experts in the detail of CCR, educating borrowers on the practical steps required to source finance.
As partners in providing these solutions, brokers would be in a better position than ever to become trusted advisers, reinforcing and building on their value proposition and directly growing their business bottom line through referrals.
Vanguards of value
At OnDeck,we believe that the extension of CCR to include SMEs would deliver a bright future for the broking channel in Australia. Our belief in the value brokers provide alongside our direct online model is why we continue to strengthen our network of local referral partners.
The good news is that, from our experience at OnDeck in the US,we know that intermediaries reap significant benefits from a more positive credit picture, including a fuller spectrum of the credit information available on a client.
With CCR, not only would brokers serve their customers by providing them with quality lending options that more closely suit their needs, they could cement more trusting client relationships and reinforce their value proposition.
With the broker channel’s share of the residential mortgage market now steady at over 50 per cent, according to quarterly data released by the Mortgage and Finance Association of Australia, CCR could add more momentum to buy-in and satisfaction with the service brokers provide, both in terms of mortgage and business loans.
By including SMEs in CCR, OnDeck believes we can support the growth and innovation of the SME economy and also help borrowers and individual broker businesses alike.
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