Issue 11: February 2023: Lending is heating up, ING makes a mess and more Software Products
A whimper rather than a bang’: Why open banking has had a slow start
Interesting article that somewhat misses the point on take-up! ANZ Bank and Commonwealth Bank both get a call out for being first to market for a lending product, but neither has gone live. The article misses the point that NextGen is going live with the Finance Passport Software Product and that Mortgage Brokers are most likely to be the main driver of take-up. The leading product in the ecosystem remains Personal Finance Management (PFM) and or Account Aggregation. This is mainly been due to Frollo’s white labeling of their service to a number of smaller banks. Also, PFM is easy to operate and manage compared to lending where CDR data will have to be retained for Responsible Lending obligations.
There are a number of issues holding back lending. In Australia, we operate in a “disclosure” model when it comes to income and expenses. Meaning the lender asks the borrower to disclose their income and expenses, and then the lender verifies that disclosure. Using CDR data via Open Banking, therefore, has some risks. What if the customer does not share all their accounts? Then there is the issue of joint income. The CDR does not allow the lender to identify who is a party to the joint account, this means there is a risk of “income hijacking”. Income hijacking is where the applicant falsely claims someone else’s income as their own.
Finally, there is the issue of complex applicants. A lot of borrowers are self-employed, have income from multiple sources, have high amounts of overtime income or split their income across different accounts or into superannuation for tax reasons. Open Banking does not easily solve these issues.
So the majority of customers who can initially use Open Banking to apply for lending will be limited to simple refinances where the customer has a single income stream deposited to a single account. Don’t get me wrong, this is still going to be a big chunk of the 500,000 or so home loan applications that are made each month in Australia.
In the following comments made by Unloan’s CEO Daniel Oertli he points out that simple applications will be processed quickly, but adds a comment that some may be referred to a team member.
“Chief executive of CBA’s digital mortgage unit Unloan, Daniel Oertli, says the bank hopes to roll out open-banking supported applications in early 2023. “You do your application, there’s about 30 seconds of processing time and then there’s a decision. Either it will be an instantly approved decision, or we refer it to a team member.”
Oertli says for simple application”, the process doesn’t require paper. Borrowers who are self-employed or who have investment income may still require manual assessments. Will it encourage switching? Oertli thinks so.”
Thrassis’ final comment: “I do see that this is the beginning. It might take five years, it might take ten years, but it will happen once you put the framework in place and the ecosystem in place.”
Article Link: A whimper rather than a bang’: Why open banking has had a slow start
Experian appoints Envestnet Yodlee as open data API provider in Australia
Experian a major provider of credit decisioning tools to the Australian Banking market has partnered with Yodlee to utilize Open Banking data.
Experian has applied for accreditation as an Accredited Data Recipient and appears to be planning to use Yodlee to do the actual collection of CDR data.
They will join the very crowded “lending simplification” market where there are already a number of players that have made very little progress. They join Credit Simple, Illion Open Data Solutions, and Verifier Australia which offer a similar service offering. While Skript, Frollo, and Mogo have all offered at some point lending simplification.
“General Manager of Experian Digital, Simone Jemmett, said: “Open Data solutions have the capability to solve two of the biggest challenges for Australian lenders: accuracy of data to support responsible lending and streamlining the customer experience to get to a faster decision. For example, lenders can harness insights from Open Data that swiftly and accurately identify income and spending habits, enabling them to make a faster decision on a loan application or offer proactive support, depending on where the borrower is in the loan life cycle.”
Article Link: Experian appoints Envestnet Yodlee as open data API provider in Australia
Article Link: Experian partners Envestnet Yodlee for Open Data
Article Link: Experian accelerates Open Data strategy with Envestnet Yodlee API collaboration
ING Bank systems upgrade could breach CDR rules
There has been a lot of press regarding ING Bank’s upcoming system replacement for Open Banking. The change will result in all current consents being canceled.
While this will be a major issue for some customers of ING Bank who have set up consents for PFM Software Products the total number of impacted customers will likely be very low.
The fintechs main reason to complain is the lack of communication from ING Bank to both the impacted customers and the fintechs.
It will of course negatively impact ING Bank customers’ view on the stability of the ecosystem.
There is a question as to the legality of the cancellation, however, I don’t see any specific CDR Rule that would stop ING Bank from making the change. Data Holders do have the ability to cancel a consent without informing the customer, this is mainly where there is an eligibility issue, but ING Bank could claim they can no longer check ongoing eligibility and therefore need to cancel the consent.
Article Link: ING Bank systems upgrade could breach CDR rules
Article Link: ING under fire for canning open banking consents in tech upgrade
Are we seeing some Open Banking Software Products disappear?
A few of the early adopters of Open Banking Software Products seem to have withdrawn.
Sherlock a CDR Representative that offered a loan tracker is no longer listed under Adatree. The related Software Product (Sherlok DRSP000066) is still active but as far as I know, there is no way to deactivate a Software Product as yet.
Also, Frollo’s Finance Passport is no longer available on realestate.com.au.
Possibly take up was so poor that Sherlock and realestate.com.au simply gave up?
It will be interesting to see if Kuber Financial a CDR Representative of Fiskil renews their CDR Representative agreement which has also expired.
FinTech Australia Launches New Sector Ecosystem Map
FinTech Australia has launched a resource for the sector: a map detailing companies in the Australian fintech ecosystem.
Brenton Charmley CEO of Open Finance Advisors comments on the CDR ecosystem “It is wonderful to see new sectors being designated as data holders, energy data sharing going live, and action initiation on the horizon. But we haven’t yet completed the first phase of open banking”
Article Link: FinTech Australia Launches New Sector Ecosystem Map
Skript launches no code access to Open Banking data
Skript lunches “Transkript” a platform to allow businesses to access CDR Data.
“Transkript simplifies the process of accessing financial information, eliminating the need for businesses to integrate with APIs or build their own solutions. Accessing Open Banking data has never been easier.”
The product seems to be targeted toward the Trusted Advisors designated in the CDR Rules (Accountants, Lawyers, Financial Planners, Mortgage Brokers, and Accountants/bookkeepers).
Article Link: Skript launches no code access to Open Banking data
ACCC grants Liberty CDR accreditation
Liberty a major non-bank lender entered the ecosystem on 1 December 2022. This article points out that the ACCC gave Liberty an exemption to defer Liberty’s obligations under the CDR rules to provide phase 1 product details until 1 December 2023.
So Liberty does not have to provide any product details to the ecosystem under the reciprocal data holder obligations. The CDR rules basically make any new Accredited Data Recipient that holds or operates accounts or loans to provide product details and later the actual data when they are accredited.
So Liberty gets to be an Accredited Data Recipient and avoids providing Data Holder data to the ecosystem! A great deal for them that will mean they are potentially years ahead of their competitors.
Liberty will have to become a Data Holder when the non-bank lenders and financial service providers are officially made an economic sector sometime next year (under Open Finance).
The remainder of the article talks about the opportunities for Mortgage Brokers to use Open Banking data.
Article Link: ACCC grants Liberty CDR accreditation
Virgin Money Australia launches Money Management via Frollo
Frollo continues to win new business for its PFM product. The latest is Virgin Money Australia which is a brand of Bank of Queensland.
This continues the trend for banks to first try out PFM with customers. In many ways, it makes a lot of sense. Get customers used to importing data from other Banks via the CDR ecosystem before moving on to more complex lending scenarios.
Press Release: VMA Money Management
Entain Group goes live with Software Product
Basiq has launched a new Software Product for their CDR Representative Entain Group.
Entain group is one of the world’s largest sports betting and gaming groups. I bet no one expected this to happen!
Fiskil promotes Energy
Fiskil promotes Energy with a nice simple webpage.
Site link: Find the right Energy API for Your Business
The Data Standards Body commences workshops for simple Payment Initiations
The regulator is about to kick off workshops around Payment Initiations. As usual, they have provided a Noting paper (291) to assist the process.
Link to GitHub: Noting Paper 291 - Workshop for simple Payments Initiation #291
New Software Products
Virgin Money
DRSP000124 - Money Management
Active
Adatree Pty Ltd
DRSP000138 - Solar Analytics
Active
Basiq
DRSP0000150 - Entain Group Pty Ltd
Active
Basiq
DRSP000151 - Flux Technologies Pty Ltd
Active