Data giant Experian positions itself for open-banking role by mid-year

Experian has appointed a unit of New York-listed Envestnet as its open data partner in Australia helping it gain access to the major banks and more than 70 financial institutions.

Envestnet Yodlee’s Tim Poskitt and Experian’s Simone Jemmett are confident open banking will get traction in Australia.

Credit reporting and data giant Experian aims to become a fully accredited and active open-banking participant by mid-2023, as it positions for take-up to increase in Australia despite macro economic challenges.

Experian, which operates across 30 countries, has appointed a unit of New York-listed Envestnet as its open data partner in Australia and which will facilitate its access to domestic data holders including the major banks and more than 70 financial institutions. The collaboration with Envestnet Yodlee is in addition to Experian in December applying to the competition regulator to become an accredited data recipient within Australia’s sweeping open banking regime.

That relates to the consumer data right – which has started in the banking and energy sectors – and gives consumers more control of their details and information, enabling them to share the data businesses hold, if permission is provided.

The Treasury Laws Amendment (Consumer Data Right) Bill 2022 was introduced to parliament in November, setting up the framework for consumers to authorise and manage their data in an action and initiation process. Examples could include making a payment, opening and closing accounts, more easily switching providers or updating personal details across firms.

A Treasury update on the consumer data right this week said: “The government anticipates that, as a result, a range of innovative business models will drive the development of new CDR-powered products and services.”

Experian’s digital general manager Simone Jemmett said while the take up of open banking had happened slowly in Australia, she expected the transition to accelerate.

“The uptake of open banking here is probably very similar to the UK experience and it will take some time for it to filter through, although we’re starting to see a lot more focus now from our clients,” she added.

“From the perspective of the economic environment, or where we are headed, it actually makes that case even more compelling. Our clients can then use the data to help them manage their customers through the challenging times that may be ahead through hardship management.

“The data access and access to the transaction data actually facilitates everything from originating loans to managing customers through their lending journey.”

The nation’s largest banks have benefited from the Reserve Bank’s aggressive rate tightening cycle by passing on hikes in full to borrowers, but holding back some of the increases from savers. But loan losses are expected to rise as borrowers are hit with even higher repayments.

Australia’s moves to open banking have been plagued by delays and some players dragging the chain on industry deadlines.

ING’s Australian operations in December paid a $53,280 penalty to the competition regulator for allegedly failing to comply with the consumer data right rules and making “a false or misleading representation” to consumers.

ANZ is yet to become a data recipient in open banking, but it is anticipated as the lender gets closer to rolling out its digital mortgage under its Plus brand, that will align with its accreditation. ANZ’s three major rivals are data recipients as well as data holders within the regime.

Envestnet Yodlee’s Tim Poskitt, who runs Australia and New Zealand, believes even though open banking has had a slow start, 2023 will mark a turning point.

“We are now getting to see some exciting use cases coming through the back end of this and actually through adoption,” he said.

Mr Poskitt highlighted the collaboration with Experian would facilitate loan and credit affordability assessments in close to real time, replacing processes that often required the printing and uploading of statements and manual data entry.

The companies said by drawing on open banking data, assessments would prove more accurate and there was less scope for fraud or errors.

More broadly, Mr Poskitt said the freeing up of customer data would see quicker switching between financial services providers, while there were also increasingly other uses too.

“We’re seeing demand across the market … If it’s an ESG (environmental, social and governance) provider or a property tech company looking at how they assess renters better and more accurately, that’s just another use case of the data.”

But on the controversial practice of screen scraping – which sees a computer scraping program extract key data, sometimes relating to a customer – Experian and Envestnet have somewhat different views.

“The data access space is evolving so our decision making on that is around allowing our clients to choose what access is appropriate for their use case and for their consumers,” Ms Jemmett said.

“We think it will all end up at open banking eventually.”

Screen scraping has been commonly used in Australia but may be deemed obsolete if enough banks, financial services companies and consumers adopt open banking.

Mr Poskitt said he believed Australia would follow the UK in banning screen scraping but provide a transition period.

“I don’t think it will be any different here and we’re fully supportive of that in our mandate and what we’ve done globally,” he said. “It will just take time to get there because we’re not yet fully set up for ingestion of data services through open banking.”