Open banking ‘a pivotal event’ for mortgage industry: NextGen.Net

With the Consumer Data Right expanding into mortgages for the first time, technology providers NextGen.Net and fintech Frollo have released a new report outlining how the regime can revolutionise the lending and mortgage industry in Australia.

On 1 November 2020, a new milestone for open banking was set as the second phase of the Consumer Data Right (CDR) took effect.

Previously, CDR only applied to big four bank data on savings and transaction accounts, call accounts, term deposit accounts, current accounts, cheque accounts, debit, credit or charge card accounts, personal basic accounts and GST or tax accounts.

As of 1 November, individual customers of ANZ, CBA, NAB and Westpac can now share their data on their joint accounts, mortgages, mortgage offsets and personal loan accounts with an accredited recipient of the CDR (of which there are currently only six) to access their data on their behalf.

According to the chief customer officer of mortgage industry technology provider NextGen.Net, Tony Carn, the regime is “a pivotal event for Australia’s mortgage industry”.

Mr Carn explained: “Mortgages are large and complex transactions. To put things in context, in September 2020 alone we saw 120,000 loan applications were lodged with an estimated $63 billion in value. That averages around $525,000 per transaction. When we look at the typical cost to process an application in the industry, that adds up to being more than $300 million per month, but 35 per cent of those applications don’t convert.

“Open banking introduces significant opportunities to remove friction from the application process, reduce the reliance on supporting documents, lessen the burden on resources required to assess customer data and radically accelerate the approval process, and the impact of CDR is going to be a matter of survival of the fittest for those in the sector.”

Mr Carn elaborated: “The opportunity to streamline credit decisions by using CDR data to reduce unnecessary friction in the application process and speed up the decision process is a game changer for the sector.

“Use cases, such as income, expense and liability verification, will also help to reduce the costs and risks involved on the lender side, making it a logical and popular use case among banks, lenders, fintechs and brokers and aggregators alike.

“It also presents a new way for how customers can be sourced and nurtured through their life cycle. It’s not just the one moment in time (such as getting a home loan), but the opportunities to get customers ‘fit for finance’ before and after,” said Mr Carn.

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Source: Open banking ‘a pivotal event’ for mortgage industry: NextGen.Net – Mortgage Business