02 Apr Open Banking is the new norm – Greg Dickason
Greg Dickason from Core Logic brings us some startling news that how we are assessed for a loan from a bank is dramatically changing. We are entering the era of ‘open banking’.
Kevin: Joining me on the show and fresh off a plane from America is Greg Dickason, the CTO International for CoreLogic.
Greg, thank you for giving us your time today.
Greg: Thanks for having me.
Kevin: I’m really fascinated. We spoke off-air about how we apply for a loan is dramatically changing because of the shift in where the data is kept or who actually has access to it, Greg.
Greg: Yes, it’s very exciting. It’s something that’s already happening in the UK and something that Scott Farrell has just released a report on here that the Treasurer Scott Morrison is going to be looking at. It’s all about the fact that the data you have and all the data that you’ve produced when you interact with your bank over all of time, you’re going to be able to make that available for other people to see.
Kevin: This is called open data, is that right
Greg: Correct, yes. Open data, also known as open banking. The whole idea is that it’s your data; it’s not the bank’s data. For example, I’ve banked with one of the Big Four for 17 years. Every transaction I’ve ever done should be able to be used by me to go and get a different loan.
So, every spend I’ve done, every credit card transaction, every salary that I’ve received, every mortgage payment I’ve made. Even the fact that I might have drawn money late at night at a gambling place is available, and so I could make that data available to others.
That could be a Google, that could be a small fintech startup, it could be one of the other major banks, and they could make a much better decision about me as a borrower.
Kevin: Of course, this is a double-edged sword, isn’t it? It’s going to make it easier, I would imagine, for us to apply for a loan, but it is also full disclosure.
Greg: Exactly. Although it’s opt-in – so you don’t have to opt in – I think very quickly, you will have to opt in to get the good deals, because the banks will say “Well, if you’re not opting in, we’re going to treat you as a high-risk customer.”
Kevin: It’s almost as if you don’t opt in, you have something to hide.
Kevin: This will, I would imagine, make it easier for us to apply for a loan.
Greg: Definitely. I think the whole affordability conversation – which is a big one at the moment, whether people are over-stating what they can afford – that’s going to go away with this because you’ll literally get to see what they earn and what they spend.
Kevin: I imagine there’ll be lots we can read into this, like affordability index and how the banks assess us.
Greg: Yes, it’s going to help a lot with the conversation of “Do we have too much debt? Are houses over-priced?” We’ll have a lot more data to be able to have those conversations.
Kevin: And we can self-assess a lot better too, I guess, if these records are available to us. Have they always been available like this, Greg?
Greg: No, this is a first. And also the way in which they’re available, it’s going to be very easy for anybody to query the bank. It’s forcing it over what are known as APIs – or application programming interfaces. So, the way in which data is shared is going to be standardized, and that’s a huge thing as well. That means we can run models over it and all sorts of things.
Kevin: I imagine, too, that this would affect things like mortgage insurance as well.
Greg: Definitely. I think it’s going to affect everything that looks at risk, because at the moment, banks have to treat us all as if we’re high risk and then decrease it as they get more data. This will change the way in which they think about risk. Risk will be much more granular.
Kevin: I think the important point here, too, is that it’s an opt-in situation if you don’t want to give someone that access. Once you give it to them, is it theirs forever, or can you withdraw that?
Greg: That’s a very good question. Scott Farrell has thought this one through. He’s looked at what’s happening in the UK, and I think he’s come up with better suggestions. In this case, you control how the opt-in happens. You can say it’s going to expire after a year, or you can only look at it once. So yes, the control is very much still with you.
Kevin: What’s the likely passage of this? Are we looking at a period of time, or does there have to be some legislation around this?
Greg: There will have to be legislation, but the white paper was talking about 6 to 12 months to get the legislation done and then potentially get it rolled out in the next 12 to 18 months after that. So, I would expect that in the next two years or so, we should start seeing this coming through in a concrete form.
Kevin: You mentioned this is already in play in the UK. Are there any other parts of the world where it is applying?
Greg: Yes. It is only the UK that is going live with it already, but it’s also throughout Europe. In the UK, it’s being run by an organization called the CMA, and across Europe, it’s called PSD2. So, it’s very much in play in Europe, and it’s starting to be talked about in the US as well.
Kevin: And will these be the same operators operating it in Australia, do you think?
Greg: No, definitely not. I think some of the big consulting firms will be involved. You’ll get companies like us at CoreLogic or Data Republic, which runs a data platform. They will become a bit of a middleman for you. But yes, it’s going to create a whole new ecosystem of providers that use data.
Kevin: When you look at extending this out a bit too – looking at it from, say, CoreLogic’s point of view – it’s going to give you access to a lot more data, albeit you won’t know the specifics behind it, but I guess how many transactions are happening, what people’s debt levels are, and so on. I suppose you’ll be able to read a lot into this, Greg.
Greg: Yes. The important thing, though, is because it is opt-in, we won’t ever see it in bulk; we’ll only see it when a person lets us opt in. So, we won’t be able to do too many models, but this is only the first step, though.
And I think the exciting thing, or possibly the scary thing, is that it’s not just going to be your banking data; they’re also looking to open up your utility data, so when do you run your electricity, look up your insurance data, your telco data, the kind of phone calls you make. You’ll also start to have control over all of that. So, increasingly, your entire life is going to be datafied, if you like.
Kevin: When we look back maybe even a decade ago, we were so concerned about Big Brother. But boy, this is a whole new level to it, isn’t it?
Greg: Very much. And you have to work out how far down this we want to go. You and I have spoken a couple of months ago, I believe, on China’s social score where they’ve actually taken it to a point where you get a score and that helps whether you get employed and whether you get credit. I don’t think we want to go as far as that.
Kevin: No. Always good talking to you, mate. Greg Dickason is the CTO International for CoreLogic, and an interesting story there about what’s happening with data and particularly how we’ll be working closer with the banks, I guess.
Greg, thanks for your time.
Greg: Thanks, Kevin.