2020: The perfect storm

The double-whammy impact of COVID-19 and the launch of the Consumer Data Right have fast-tracked new digital-first lending solutions that will revolutionise the industry, writes NextGen.Net's Tony Carn

2020: The perfect storm

Although nobody could have foreseen that 2020 would have been the year a pandemic changed the way we live, work and do business, NextGen.Net saw the digitisation of the mortgage industry coming.

Like the rest of the financial sector, we just didn’t anticipate that it would come so fast. The reality is that the perfect storm of COVID-19 lockdowns, social distancing and work-from-home measures, combined with the introduction of the Consumer Data Right and open banking, has brought 10 years’ worth of product digitisation plans forward to six short, intense months for the lending sector.

What COVID-19 taught us in the mortgage industry is that being an early adopter of new technology pays off when it comes to future-proofing your business. Although many of the digitisation tools available on NextGen.Net's ApplyOnline platform – such as the Document Verification Service and ‘eSign’ – have been around for some time now, it wasn’t until the pandemic hit that higher adoption took off out of necessity.

CDR will revolutionise the industry

The CDR launched in Australia on 1 July 2020, with the financial sector (open banking) the first to go live. Giving consumers more control over their banking data, the CDR enables consumers to safely share their data with trusted third parties.

Open banking also introduces significant opportunities to reduce reliance on supporting documents and lessen the burden on resources required to assess customer data, and radically accelerate the loan approval process. That’s a win-win for customers and lenders from a time and cost point of view.

Adapt or die

Recognising how open banking would change the future of Australia’s mortgage industry, in July 2020 NextGen.Net acquired Frollo – a purpose-driven fintech and accredited data recipient under the new CDR regime. Using Frollo’s technology, NextGen.Net will use CDR data to improve the loan application process and lead the way to making lending easy.

In November 2020, NextGen.Net and Frollo published the first industry report on The State of Open Banking in Australia since the CDR launched. The report highlighted that 71% of respondents intend to use CDR data and almost 58% plan to do so within the next 12 months. Streamlining the lending process through income and expense verification was identified as the most popular immediate use case for open banking.

The impact of the CDR is going to be Darwinian – so it’s a matter of adapt or die. Today, 99.9% of all mortgages are completed and lodged digitally, but 15 years ago all those applications were faxed. We look back now and wonder how we ever did it that way. Open banking will be exactly the same, so it’s a matter of evolving through change management or being left behind.

Although we don’t expect the CDR to become embedded in the lending industry overnight, we are starting to see a number of lenders invest in the evolution of open banking in terms of their own approval processes.

We predict several lenders will emerge as real leaders in the space over the next 12 to 24 months, particularly as more ADRs come online, consumer awareness starts to grow, and lenders begin to see the benefits of faster turnaround times, more compliant and reliable data, and a lower head count.

Build or buy?

With many lenders working on legacy systems that are not fit for purpose in the new open banking ecosystem, now is the time to do a robust assessment of your readiness to leverage the innovations that will come with the evolution of open banking. And one of the big questions is whether to buy instead of build.

With an established and mature Software as a Service (SaaS) model, NextGen.Net embraces the concept of ‘configure, not customise’. Modular delivery provides economies of scale in terms of delivery and training, meaning businesses that use ApplyOnline benefit from the continual investment NextGen.Net makes in ongoing research and development to deliver fit-for-purpose lending solutions.


Tony Carn is the chief customer officer at NextGen.Net.