The government's "open banking" regime will allow banks to meet stricter requirements to lend responsibly that may flow from the Hayne royal commission, experts say, because it will allow each major bank to get the actual income and expenses data from new customers' existing banks, avoiding the need to rely on estimates or benchmarks.
Damir Cuca, the founder of Basiq, a start-up building an open banking platform part-owned by the VC funds of Westpac and National Australia Bank, said the royal commission had drawn banks' attention to responsible lending, the need to reduce fraud and help customers through hardship.
"Open banking is a great way to achieve this and almost single-handedly solves the problem," he said. "Like a fintech, banks will be able to utilise services to improve their own processes as well."
With increased scrutiny on fraudulent loan applications, Mr Cuca said open banking will remove the need for banks to rely on pay slips and copies of bank statements.
"It is obvious from the royal commission going on that there is a lot more that banks can be doing to tighten up processes and open banking is a solution for that," he said.
"It provides access to real data that is very difficult to fake. Fraud is very easy with the current processes. But under open banking, that is more difficult. Open banking is also more transparent. You can have access to data in real time, and historical data as well, and determine whether what a customer is saying is true."
Discussion at the Summit of how technology can assist banks' responsible lending came after Westpac Banking Corp CEO Brian Hartzer expressed concerns the Hayne royal commission will lead to a reduction in the automation of credit decisions and a switching back to manual processes.
For the full story head to the Australian Financial Review.