Home loan startups warn against ‘hard transition’ to data harvesting rules

Home lending fintechs have welcomed further guidelines for open banking but say they will be forced to use old methods of collecting customer data, including "screen scraping", for some time yet.

Australian fintechs are getting a clearer picture of how open banking will work, with the Office for the Information Commissioner this week releasing privacy safeguards outlining how the new players and established banks must obtain consent from customers before acquiring and sharing their data under the regime.

Tic:Toc founder Anthony Baum said lending fintechs will have to use alternate approaches to obtain customer data before open banking is rolled out to mortgages. Credit:Dean Martin

The guidelines explain how fintechs and banks must gain consent from clients before handling their data, including setting up a "consumer dashboard" which allows customers to provide explicit consent for sharing information over time.

Australian fintechs are already using a range of approaches to sharing customer information, including through data aggregation services which collect information about a customer's financial position after they have provided consent.

Chief executive of lending disruptor Tic:Toc, Anthony Baum, said that regulations for open banking were great for certainty but there will still be a need for lending startups to use traditional approaches to access customer data even after the rollout begins.

"We can’t have a hard transition — we won't have every customer’s data available for all accounts until the open banking framework is complete, and you need to allow for data aggregation in the interim," he said.

Consumer groups have argued there should be limitations placed on the practice of data aggregators using “screen scraping”, which involves consumers consenting to provide their login details so that fintechs can get a better picture of their financial position, because of safety concerns.

Sector lobby group Fintech Australia has long argued that data aggregators still have a critical role to play in delivering services.

Co-founder and chief executive of Athena Home Loans Nathan Walsh said that while open banking will not apply to mortgage products until the end of the year, he sees home loans as the "main game" for the regime because sharing of data will help customers access better deals and refinance.

"Inertia is a $10 billion disease in the mortgage market," he said.

"To some extent, it is the golden moment of proving the value of this reform."

Mr Walsh also urged caution in the transition towards open banking processes, saying the mortgage sector in particular would need to keep using data aggregators to obtain customer data for the foreseeable future because it would be one of the last financial products to have open banking apply.

"I think there is always a journey, where until the consumer data right is comprehensive, there will be a need to access data with other methods as well," he said.

'Inertia is a $10 billion disease in the mortgage market.'

Chief executive of home loan matching startup Lendi, David Hyman, said clear privacy safeguards and accreditation policies were still critical for the sector if customers were to trust in and use open banking over the long-term.

"For CDR and open data to take off, consumers need to trust it. If some fintechs don't have the resources or capability to meet accreditation requirements or to properly protect data, then they shouldn't have access," he said.

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