Basiq, a leading fintech providing access and insight into financial data, worked with Regional Australia Bank, Australia’s first accredited data recipient, to approve the first open banking loan.
The loan approval takes place less than a day after the introduction of Open Banking and marks a new milestone in the Australian Open Banking regime.
Open Banking is governed by the Consumer Data Right (CDR), which gives Australian consumers the rights and protections to securely share their data. In the first phase of Open Banking, any customer of the four major Australian banks can request that their account details be passed on to an authorized third-party provider. In exchange for their data, consumers can access personalized financial services and products that are right for them.
So far, the advantages of open banking still have to be proven and there is a lack of consumer education about open banking. The success of Open Banking depends on the willingness of Australian consumers to share data, and the regime’s first loan approval gives Australian consumers an insight into the value that can be generated with their data.
With the approval of Open Banking’s first loan, Regional Australia Bank has demonstrated the value exchange waiting for consumers to consent to their data sharing and what that process might look like. The customer’s own bank received an online personal loan application request on the evening of July 1, and with Open Banking the applicant was able to securely share over 3,000 transactions as part of their application within seconds.
According to the applicant, the transfer of the data was a simple process that did not take longer than six minutes and the best part? The prepayment of their expenses. This is a far cry from manual credit assessment processes that require applicants to estimate their expenses and collect bank statements. Behind this process is Basiq, a fintech that specializes in findings from financial data. Using Basiq’s data analytics capabilities, the applicant’s expenses were analyzed in seconds into expense categories such as “transportation” and “leisure”, enabling Regional Australia Bank to make an automated credit decision based on a clear understanding of the individual’s financial condition and spending behavior.
A smooth loan approval process is just one of many use cases that can be achieved with Open Banking. Big Four customers can now easily access financial products and services outside of their primary provider. This opens up opportunities for fintechs who can leverage a full financial picture of a client to create unique credit and digital banking solutions that better meet clients’ needs. Combined with the lower switching costs, incumbents will face increased pressure to offer more competitive and innovative products in order to keep their customer base, with consumers being the ultimate winners.