Banks will assess loans using real spending data: Basiq

A start-up backed by Westpac and National Australia Bank has developed software to read bank account data and automate the loan assessment process for banks, allowing them to base lending decisions on actual customer spending rather than relying on estimates and indexes.

Basiq’​s system is being used by Regional Australia Bank, whose chief risk officer Campbell Nicoll says asking customers to estimate spending in various categories during an application process no longer cuts it.

“People have just been guessing their expenses,” he said. “But Basiq plugs into our bank, extracts two years of transaction data, categorises it – and that and gives us the true picture on expenses.”

The Australian Financial Review reported on Thursday that a young borrower recently had a home loan application rejected by Macquarie for “serviceability issues”, after she ran up big bills on Uber and Uber Eats.

Banks have been adopting stricter checks on customer spending before approving loans after the Hayne inquiry suggested it was not sufficient for banks to use indexes. Verification “calls for more than taking the consumer at his or her word”, Commissioner Kenneth Hayne said in the interim report.

Basiq founder Damir Cuca said the major banks still have largely manual processes to check the estimates provided by customers match up with reality. But he predicts assessments will soon shift to using actual data in order to meet responsible lending obligations in the wake of the royal commission.

“While everyone is talking about it or looking into it, Regional Australia Bank have already done it. This is the future and it will be the way banks will assess all applications going forward,” he said.

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Source: Banks will assess loans using real spending data: Basiq