Open Banking: A Chance to Shine

by 03 Jul 2018

Lodex co-founder and CEO Bill Kalpouzanis, highlights the key role brokers can play as Australia catches up with open banking

The multibillion-dollar rollout of open banking promises to improve customer experience, generate new revenue streams for the financial services industry, and create a sustainable service model for underserved communities. It puts the power into the hands of consumers to shop around, directly and through brokers, if they feel in any way neglected by their banks.

We hope open banking might be the halfway house that will get people comfortable with the idea of using their data, and enable them to think more broadly about the value of their personal information. If we look at China, we can see rapid developments in the way technology is changing how creditworthiness is assessed. For example, algorithms employed by Alibaba Group use 20,000 data points on retail customers (including transactional data) in order to offer them small loans. This is a clear demonstration of the power of non-bank data and the fact that there is more to creditworthiness than just what a bank can tell consumers and brokers alike.

At the moment, brokers may struggle to efficiently assess applications from immigrants and other clients with a thin banking file and credit history but quite decent fundamentals. But if Australia follows global trends, then we too can expect non-traditional data to complement existing bank data, with significant societal benefits – not to mention making the process simpler for brokers. Lodex, for example, has already pioneered the use of social scoring (alongside other non-bank data points): it is a tool with the power to unshackle the estimated three million Australians who simply don’t have enough of a credit footprint to secure a loan.

In India alone, social-scoring technology is providing a financial lifeline to the estimated 350 million people with insufficient banking data

Lodex uses Lenddo technology to harness members’ unique data and give financial service providers a greater understanding of their customers. While it’s a first in Australia, it’s been tried and tested overseas: LenddoEFL has already successfully rolled out a social-scoring model in 20 countries. In India alone, this technology is providing a financial lifeline to the estimated 350 million people with insufficient banking data. Back in Australia this should also mean a bigger pool of consumers who could benefit from financial advice when navigating their options.

So what’s the hold-up here in Australia? It’s evident that some banks are fuelling unease by discouraging customers from sharing passwords and other evidence of their digital footprint. Also, local banks here are yet to take the plunge and use alternative types of credit-scoring technology.

Resistance is a problem, but banks have a huge amount to gain from open data. Open banking will force banks to invest in technology, with a knock-on effect on innovation. And some banks are forward-thinking. In recent weeks, ANZ has taken an equity stake in Data Republic and will soon begin using the data exchange platform to develop insights on its customers. NAB also recently announced it is to implement DocuSign technology.

Rich insights can drive innovation in product development, and will likely save time and money in the long run. This also means better products for brokers to offer their clients.

In three to four years, the banks will have to adapt to the maturation of new technologies and challengers entering the local marketplace. As this happens, brokers will have an important role to play in reassuring clients that their data empowers rather than exposes them.

Bill Kalpouzanis
Co-founder and CEO