Credit report delay shows fintech social risk concerns
Nothing is more valuable to a fintech start-up than data. And some of the best quality data for pricing financial services are the historical records of customer debt repayments.
When run through algorithms, these can indicate how likely a prospective borrower is to repay a loan in the future, which helps with assessing risk and pricing.
Fintechs are right on the cusp of getting access to this “repayment history information” (RHI), through the government’s new “comprehensive credit reporting” (CCR) regime. The policy is due to come into force in just over a fortnight, and would require banks to attach RHI to customer reports provided to credit bureaus.
So the last-minute move last week by Labor, backing consumer group concerns that RHI may discriminate against borrowers in hardship, is frustrating for fintechs, especially those in the business of personal lending.
Labor said it will amend the bill to delay the reporting of RHI into the scheme for a year, to allow the Attorney-General’s Department to report on how borrowers in hardship should be treated.
Taking care with data
Beyond the politics, the dissenting report by Labor members of the Senate’s standing committee on economics, which prompted the Opposition’s amendment, should be required reading for fintechs and banks, whose reputations will also be impacted by how data is used under CCR.
The report shows policy makers are attuned to an emerging risk of more data being used to price financial services – that it will lead to more discriminatory pricing.
There are implications in this for the public perception of banks, and the social order more broadly.
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