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Express lending - new data rules give borrowing an overhaul

Borrowers are set to benefit as new rules give lenders access to more accurate, up-to-date information when making decisions about extending credit. Recently introduced open banking and consumer data right (CDR) laws mean lenders are developing quicker, better digital loan application technologies, allowing them to automate loan applications and credit decisions.

April 09, 2024

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At the same time, these rules give consumers more control than they have ever had over the information their financial institutions hold about them.

For borrowers, the upshot is more efficient loan applications and more choice. The automation open banking supports also reduces the cost to lenders to assess loan applications, which ultimately makes lending more affordable.

“Imagine a world where you no longer need to repeatedly input identical information across various businesses, where processes are streamlined and consumer effort is reduced, says Deloitte Access Economics partner, John O’Mahony.
For lenders, open banking means increased efficiencies and enhanced processes. Against this backdrop, robust data management is vital, because the data sources and AI required to power lending automation need to be trusted.

Data sets must be comprehensive, real-time and diverse. Then, it’s all about making sure the data we use in our proprietary lending platform is accurate

Richard Shanahan, Tiimely Chief Solutions Officer

Thanks to the new open banking and consumer data right laws, Tiimely’s lending automation platform can leverage a new trusted data source so it can accurately assess borrower information even faster. This has industry-wide implications.

“It’s important for our members, and their clients, that the collection of information is as thorough and frictionless as it can be,” says Anja Pannek, CEO of the Mortgage and Finance Association of Australia (MFAA).

The MFAA is calling for the sector to accelerate the transition to CDR.

“While uptake of CDR has been slow, our observations are that product development and integration has definitely accelerated more recently. It’s now up to industry to get on with it,” says Pannek.

Tiimely’s processes are able to validate applicants’ full financial position and serviceability, to ensure borrowers can meet their repayments and loans comply with responsible lending standards.

Tiimely, which now handles 3 percent of all Australian home loan credit enquiries, uses what Shanahan calls an ensemble approach to its data sources, drawing on a range of variables to assess and validate a loan applicant’s true financial position.

“We can validate inputs such as the borrower’s income and tax position versus the information they have disclosed about their financial position,”

“Then, it’s about managing the data, making sure we meet compliance obligations and consumer expectations and allowing lenders to securely delete any data that’s no longer required.”

Shanahan explains open banking and the consumer data right increase the range of data sources available to lenders when making lending decisions.

For instance, Tiimely draws on credit reports issued by credit bureaus and real-time account and transaction data, as well as a host of other factors, when assessing credit applications.

Then, it’s a process of enriching data through categorisation, removing noise such as duplicate transactions and internal transfers and identifying behavioural flags.

“With open baking the consumer is in control. They consent to the information they want to share and for what purpose. For us, consumer consent and automated data collection is paramount,” says Shanahan.

The control open banking offers consumers over their data should translate to better outcomes for them.

“If I’m in control of my data, I’m in control of when I can refinance my home loan,” says Shanahan.

“On average, people refinance their loan every three to five years. A lot can change over that time which can impact the way they view their home loan, for instance interest rate movements. Or the borrower might need access to extra capital and decide to refinance.”

“If you’re in control of your data, you can refinance more often. Lenders have to be more competitive on price and time in a world where consumers refinance more often. This is how we think open banking is going to make it easier for lenders to automate decisioning and for consumers to realise savings more frequently.”

As for the future, the open banking and consumer data right laws continue to evolve and Tiimely expects to remain at the forefront of the changes impacting financial services from these new rules.

“We’re really excited about the future,” says Shanahan.

“We want to make sure the industry and regulators stay the course and consumers’ rights are maintained, and have developed componentised solutions that are data agnostic, so that lenders can embed data consolidation, enrichment and validation capability into their existing tech stacks now, rather than undergo lengthy digital transformation projects that could leave them years behind.

“We’re hopeful that working with industry participants, data holders, data recipients and regulators, we can iron out the kinks in open banking so it can genuinely power lending automation and improvements for consumers.”

This article first appeared in the Australian Financial Review

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