Will the royal commission be satisfied by the CIF's commission tweaks?
A broker and two lenders explain how the cooling property market and royal commission are affecting SMEs
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The government-backed open banking framework will potentially become a game-changer for ‘new-to-bank’ product origination, thus making account switching between institutions far easier, said a tech executive.
Nick Edwards, Australia and New Zealand sales director at financial services software company, Avoka, added that the availability of the data will help smaller, newer market entrants make better lending decisions.
Privacy at the core
According to Edwards, once open banking gets underway, there will be winners and losers. Winners will be those who can maximise newly available data from the various data streams to better manage risk while delivering outstanding customer experience.
“Over time, it’s likely that more ‘alternate’ data about consumers (health, education, how you drive, what you do) will be collected to more effectively help organisations make decisions and price products,” Edwards said.
Avoka head of client advisory Chris Wooldridge acknowledged that “privacy is a core aspect of the open banking standards”. The good news about open banking is that consumers will be able to control consent to the use of their information, but that will “create islands of information outside of the banks which are likely to be the vulnerable spots”.
“It must be acknowledged that building a secure platform for the collection of data is incredibly difficult and ensuring privacy is something the industry is currently reviewing and defining, including who’ll be responsible for policing these standards,” Wooldridge said.
“Developing this system requires a specialist team and is perhaps not able to be managed by smaller financial institutions on their own.”
According to Edwards, financial services will undoubtedly take on additional compliance burdens internally or from regulators, with the royal commission’s interim report calling out the banks’ compliance systems as managing things in ‘piecemeal rather than comprehensively’.
“Overlay this with a move to open banking and the new privacy and security protocols and a likely increase in the power and resources of regulators — and banks will have a thin line to walk,” Edwards said.
Wooldridge added that long before open banking, the commission has highlighted significant wrongdoings driving talks about banking transparency and ease in switching products. The result will impact lending decisions for both small and large entities. Larger organisations have to confront additional complexities; the question for them becomes, “How does a bank enact the additional obligations without negatively impacting the customer experience?”
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