Comprehensive credit reporting laws will drive innovation and protect banks

In the blue corner, lining up to support the bill to ensure customer repayment history is provided in credit reports, are: the government, all of the banks, the entire fintech industry, the credit bureaus, the regulators (especially the Australian Prudential Regulation Authority), and many equivalent western economies such as the US, UK, Canada and New Zealand.

In the red corner, lining up against it, are consumer groups and the Labor party.

At the last election, Labor also supported “comprehensive credit reporting” like nearly everyone else, but this month decided to back a 12-month delay to the reporting of “repayment history information”, which sits at the core of the regime.

Positions of the minor party positions will become clear this week, with both houses set to debate the bill to introduce a mandatory regime for the big banks to report half of their credit data from next week.

There are at least three main reasons for Australia to adopt comprehensive credit reporting (CCR).

One, it will propel competition in the new, data-enabled world of mobile apps and open data. It will help fintechs create more innovative services.

By lifting innovation, it will apply competitive pressure to the banks’ oligopoly and force them to adopt more fintech to lift their own games.

Two, it will help banks lend more responsibly. It seems likely royal commissioner Kenneth Hayne calls for banks to use more granular, actual customer data, rather than relying on estimates in indices.

Better data can reduce bank exposure to defaults. The UK regulator recently found repayment history is a better determinant of when borrowers will default on a loan than looking at a debt-to-income ratio.

Our local banks are way behind the eight ball when it comes to access to quality data. This is why APRA wants CCR too.

To read more, please click on the link below…

Source: Comprehensive credit reporting laws will drive innovation and protect banks | afr.com