Dec 2022 | Decisioning | Consumer Data, Open Banking

Over half (52%) of Australian and New Zealand consumers are happy to share their banking transactional data if it leads to immediate access to funds from a loan.

The adoption of Open Banking is steadily increasing across the globe. One of the main reasons for this is that consumers are becoming more willing to share their data – on the condition that businesses offer assurance of data security and can demonstrate the value of sharing data. 

Research published in Experian’s 2022 Business and Consumer Insight Report found that around half of consumers recognise that, if they want access to a product or service, their data must be shared. For example, almost one in two consumers are willing to grant companies access to their financial information to receive help with online application checks for financial products.

Consumers’ willingness to share data unlocks opportunities for businesses. Data can be turned into actionable insights that enable companies to improve their performance and provide a better and more personalised customer experience. In turn, enhanced customer experience is likely to further encourage consumers to share data.

This is the virtuous circle of Open Banking. The promise of a better customer experience is boosting Financial Services and Telco providers’ investments in Open Banking. This is clearly illustrated by the fact that 90% of the Australian and New Zealand businesses surveyed have already invested or are planning to invest in Open Banking, and nearly half (48%) are seeing significant value from their Open Banking projects.

Consumer consent is key 

For those businesses the value of Open Banking is clear. However, many consumers are yet to fully understand the value and benefits that it can provide. Businesses need to clearly articulate this value exchange to potential customers to encourage those consumers that are still hesitant to share their data.

Experian’s research indicates that 22% of Australian and New Zealand consumers are unlikely to share their data but a significant proportion of this same group would be willing to change their mind for the right reason. Explaining the advantages of sharing their data via Open Banking at the point of consent in the application process is vital for businesses to avoid losing these potential consumers.

Nearly half of the Australian and New Zealand surveyed consumers who were unlikely to share their data were willing to do so if it guaranteed a faster application process, 46% were willing if it would give them a preferential offer, such as a better loan rate, and 50% to ensure that they would not have to submit any paperwork. By including these benefits in the application process businesses can improve the speed of lending decisions and take advantage of the increased depth of data from consumer-consented financial information.

Augmenting bureau-based scores with transactional data

Businesses are leveraging Open Banking across a wide range of use cases to improve multiple aspects of their operations. One of the top priority use cases is that of risk assessment. This was highlighted by 70% of the Australian and New Zealand Financial Services and Telco firms surveyed in Experian’s latest research.

This is where transactional data from Open Banking can be especially powerful. Transactional data can be used in conjunction with bureau data to assess the creditworthiness or affordability of a potential customers or enable the creation of standalone transactional data credit risk scores. By combining data sources, businesses can build a much stronger risk assessment model. Transactional data provides detailed insight into each customer and is extremely valuable in assessing risk throughout the customer lifecycle.

Another relevant point to emerge from the research is the wide range of critical and high priority use cases applicable to Open Banking. The variety of use cases highlighted by businesses is striking. In addition to risk assessment these include payments services, affordability assessments, income, employment and identity verification, spotting customer vulnerability and personal financial management.

The journey towards Open Data 

Open Banking is far from being the ultimate destination. It can be seen as a steppingstone on the way to creating an economic system based on Open Data – where consented account data is connected from sectors other than finance, including insurance, telco, energy and even government held data.

In this “new world”, data will be transferred effortlessly post-consent and information will flow in near real-time. It will mark the departure from the “old world” of manual customer steps. For instance, it will make printing and sending documents, one of the main causes of application abandonment, a thing of the past.

Not only will Open Data allow businesses to abandon many traditional, manual, practices. It will also lead to a considerable reduction in the number of steps that still slow down digital processes, such as downloading a payslip from a portal and uploading it to another, in the case of a mortgage application.

This is a big deal for Financial Services and Telco businesses, who have long struggled to match the online customer experience offered in other sectors, due to the number of procedures and checks necessary to satisfy regulatory requirements. Open Data will finally allow them to address this point effectively, enabling Financial Services and Telco businesses to enhance the overall digital experience provided and streamline the support available to customers.

For instance, personal identity and financial documents could be held in a digital identity wallet, owned and managed by the consumer. When applying for a loan, the customer would select the documents required for the specific application they are submitting, for instance a driving license for identification and bank transaction information to demonstrate affordability, and these will be securely shared with the lender to complete the application process. The speed at which consumers can apply and businesses can run financial checks will be shortened considerably.

It is no exaggeration to say that we are entering a new era of business services. The shift to Open Data will enable Financial Services, Telco and other authorised organisations businesses to exceed customer expectations and interact with unprecedented levels of convenience and simplicity.

While these benefits are glaringly apparent to businesses, it’s crucial that the advantages to potential customers it is clearly articulated. Familiarity with Open Banking is growing fast and those businesses that help to educate the public stand to be at an advantage over their competition.

For more detailed insight into consumer and business attitudes toward Open Banking, view the interactive summary and download Experian’s latest report.

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