Borrowers would need someone to guide them through uncharted territories
Although it only pertains to the big four at the moment and interpretation of its new laws is still up in the air, the Consumer Data Right (CDR) in the post-royal commission lending environment is good news for brokers, says Zippy Financial principal broker Louisa Sanghera.
“We all know we need to diversify our advice and services, and open banking should naturally stimulate the conditions we require to do so,” she added.
"In theory, open banking should streamline processes, allow approvals to be completed more quickly, and give brokers the opportunity to focus on the extra value they can provide for their clients.
"Open banking is tipped to serve as somewhat of an antidote to the recent upheaval caused by the Royal Commission, APRA’s interventions and the downturn in the property market."
Introduced by the government as part of the 2017 federal budget and cleared in the upper house in late July this year, the CDR has set the scene for a more open banking system which would enable customers to share their selected banking data with accredited third parties.
Designed to improve choices available to customers within the financial services sector, the CDR should make it easier and more convenient for brokers to manage interactions with clients as it gives everyday Aussies greater control over their information, Sanghera said.
Reverse the stigma
According to Sanghera, many brokers feel the industry suffered a bad rap in the wake of the recent challenges it faced and the media’s click-bait coverage. But with open banking, the stigma can be reversed by showing the public just how customer-centric brokers really are.
“We’d all prefer our clients to see the human side of our work and relate to us on that level, but that hasn’t always been easy. Open banking is an excellent opportunity for us to drive change from within the industry and boost public perception of the financial services,” she said.
Open banking is particularly a big step in the right direction for self-employed or seasonally employed clients because it will leave institutions with no choice but to offer a better range of tailored products and services that meet customer demand.
“Open banking is set to drive innovation throughout the country. [It’s] great news for both brokers and clients,” Sanghera said.
One with major economies
The added benefit of open banking is that the plethora of new products it will unleash will make the broker sector more important than ever before as borrowers would need help in navigating uncharted territories, according to Sanghera. Brokers will also need to appease clients’ fears surrounding their privacy and the potential misuse of their personal information.
"As a knowledgeable and reliable port of call for queries on these concerns, brokers will build their image as trusted financial services professionals, with the potential to gain new clients and commissions in the process," Sanghera said.
“When open banking is finally up and running, Australia will join other major economies, such as the UK and the European Union, that are already enjoying its benefits.”
