New data privacy rules set to boost lending
Australia's open banking regime moved a small step closer to implementation with the release of draft privacy safeguards by the Office of the Australian Information Commissioner earlier this week.
Stuart Stoyan, founder and chief executive officer of non-bank lender MoneyPlace, was upbeat about the proposed rules. Speaking to Banking Day on the sidelines of the 2nd Open Banking Summit in Sydney yesterday, he affirmed that these privacy rules put in place protection that data is not going to be misused and consumers are not going to be mistreated.
"This is an articulation of the existing rules, regulations and rights under existing law, by ensuring that they are applicable for a world where the Consumer Data Right exists," he said.
"If a customer shares data with the company for a particular purpose, these rules limit the ability of that company to use the data for another purpose - for example, for marketing."
Stoyan said this was one of several positive moves being implemented, opening up opportunities for lenders to establish points of difference.
"One of the quickest ways to demolish your credit score is to apply for several credit cards on the same day as it gives the impression you are desperate for money rather than just seeing what interest rate or credit limit you are likely to be given," he said, by way of example.
"Whether you have applied for something shouldn't matter. What should matter is whether you took out the loan how much she borrowed what your limits are, and what your utilisation of that [facility] has been."
What has happened, though - and MoneyPlace is one of the fintechs that is introducing this feature - is that a consumer can apply for an estimate of their eligibility for a loan and will be told the rate at which would be charged without formally applying for a loan and not be penalised for doing so.
"In effect this allows consumers to engage in price discovery of interest rates - and the fee structures, in some cases - in a similar manner to many other consumer businesses," Stoyan said.
"The key take out here is consumers should know that the CDR rules and open banking will change over time as we get more accustomed to the framework that we use and what the actual CDR regime is.
"These rules will also evolve over time as other industries, other than financial services, introduce CDR as well."
This potentially paves the way for the global tech companies to come into financial services in Australia," Stoyan suggested.
What it will come down to is whether or not banking is a utility and, if it is, consumers will want to go to where the best proposition is.
"This is because the Googles, and Amazons and Apples of the world run a beautiful customer experience. They are already very strong on data analytics, so offering a loan is not that much of an extension, given that they have the customer capability and the data capability to be able to offer it," Stoyan said.