Open banking to turbocharge RateSetter
If you’re reading this blog, its likely you’re familiar with RateSetter, the value we provide our customers and our contribution towards creating a simpler, more transparent and more resilient financial system in Australia.
Well, things are about to get better – much better – for RateSetter, our customers, and our financial system.
Typically, when a borrower applies for a loan with a lender (whether that’s a personal loan provider like RateSetter or a large mortgage lender) there are various verification processes that the lender must perform to satisfy regulatory and risk requirements. Some of these steps can be onerous for the applicant and lender, most notably the general requirement for the applicant to provide and the lender to review the applicant’s bank statements to verify income and expenses.
The friction created by not having easy access to an applicant’s income and expense information, especially when the applicant is applying with a lender who isn’t their primary bank, is significant. This means that an incumbent finance institution often has a significant advantage over any competing institution. Inevitability, this information asymmetry results in reduced competition.
Well not for long! Open Banking is going to create a new world where control of information rapidly shifts from incumbent institutions to the customer. Consumers will be given the ability to determine who has access to their banking transaction information as and when they like.
Put simply, this is going to shift the balance of power from the institution to the customer, and lead to increased competition in our financial system. Consumers will find they are offered better value and more personalised products and services. We expect that businesses like RateSetter will help lead the charge, as with our technology focus we are better placed to tailor products for an applicant’s financial situation.
Good news for investors too
And it’s not just good news for borrowers: we are confident the advent of open banking will help turbo-charge our growth, providing more opportunities for our investors to invest in consumer loans at attractive rates. Importantly, open banking will also help reduce the risk for our investors, and we will be in a better position to underwrite and price the credit risk.
From where we sit, we see open banking as a huge win for consumers in Australia. We also see its introduction as a defining moment for the growth and success of our business, whilst supporting our vision of a simpler, more transparent and more resilient financial system.
This information does not constitute financial advice and you should consider whether it is appropriate to your circumstances before you act in reliance on it. Any opinions, forecasts or recommendations reflect the judgement and assumptions of RateSetter as at the date of publication and may later change without notice.