Open Banking and impact on CC Churning

[EestiTiger]

How do people feel 'Open Banking' will affect CC churning? If a new application is conditional on your agreement to share your current / prior CC, Bank Account etc transaction records it is going to be a fun time.

Open banking in Australia might not launch with a full data deck

 

[theblank]

meh: if banks wanted to know what spending was like on other credit cards prior to approval they would ask you to send in copies of your statements, like they do already with home loan applications (expecialy lf LMI is involved)

The article you shared doesnt even mention that this is going to be a thing.

 

[Lynda2475]

There was an article saying it might affect home-loan applications in the SMH today. Article seemed to imply that most people underestimate their actual spending, but if banks/lenders can view details of your credit card spend on things like uber eats etc they wil reduce the amount they are willing to lend you.

IMO only important thing should be your current level of debt, history of servicing debts on time and not defaulting. If i always pay my credit card off in full then see no reason the bank should care what Im spending my disposable income on.

 

[theblank]

There was an article saying it might affect home-loan applications in the SMH today. Article seemed to imply that most people underestimate their actual spending, but if banks/lenders can view details of your credit card spend on things like uber eats etc they wil reduce the amount they are willing to lend you.

As I said already, banks have always been getting this information from the applicant anyway, since like forever, there is nothing new here.

IMO only important thing should be your current level of debt, history of servicing debts on time and not defaulting. If i always pay my credit card off in full then see no reason the bank should care what Im spending my disposable income on.

We care (in my case I am no longer one of the we). Transactional statements can paint some fairly nice pictures about the applicant.

You are right about the primary factors these are what we look at first, but if/when and applicant falls just short of some of the criteria and we need to look for positive reasons to approve, if there are any red flags in the customerst transactional statements then its unlikely to win the support of the approver or LMI. Even if approveing it myself it still goes higher up for overviews, so there is no chance of glossing over something like a bunch of consecutive ATM transactions at a poker machine venue.

 

[Lynda2475]

No this will give banks more information.

When i applied for my mortgage the bank only requested proof of income/employment (statements and letter from employer), proof of savings history (statements) and credit card limits. If the credit cards were held with other banks or providers they had no access to see the transactions on them i.e. if i was eating out everynight or ordering uber eats. Open banking changes that and could lead to wrong assumptions. Also the living expenses on application were totally applicant completed.

For example i take a lot of ubers for work, until recently these were reimbursed (now charged direct to company account) but a lender might assume i waste money using uber everyday - however says nothing about my ability to repay my loan. The gambling example is different but i have to imagine a person with a gambling pronlem would have terrible savings history or that a savvy gambler would just withdraw cash elsewhere i.e. supermarket.

 

[TomVexille]

I'm guessing that you haven't applied lately?

 

[theblank]

proof of savings history (statements) and credit card limits.

you are missing the point, If the banks want to see the transactions on your statements they can already ask for them. (Nornally proof of credit card limits are the statements themselves)

Under open banking, if the banks want to see the transactions on your accounts they will have to ask you go give that permission. If you dont given then that permission they wont get it

There is NO difference, you are getting excited over absolutly nothing.

Further Banks do not desire to go out of their way to look for reasons NOT to approve your loan. They want to lend you money. thats how they make money.

anyway, I have only approved or written many millions of dollars of home/commercial loans in my lifetime - excluding automatic assessement. I might know a little something about credit and approval principles.

 

[Lynda2475]

Not getting excited, just noting that the article saying that ordering uber eats too often will impact credit approvals seems misguided. A person is entitled to spend their income on uber eats 3 meals a day if they want, none of a lenders business provided they can meet their loan repayments as required.

The bank can verify credit limits via credit check you dont have to give them a statement. They can lend resonsibly without worrying about how a customer sources their meals. Plenty of people who cook every night that cant manage a budget.

I know the royal commission has seen a tightening of criteria, but worrying about electronic spending over cash seems over reaction. People who transact predominentoy digitally have superior visibility of their spending over those who rely on cash.

I last worked for big banks 2 years ago, back then the guidelines were more concerned with LVR, deposit (a history of actual saving trumped parental gifts), employment stability, good credit record - this is where the checks should be.. if they want to reduce risk, up the deposit required, and make sure percentage of income required to serve repayments is viable at a proper interest rate i.e. 10% not the crazy low rates right now, they arent sustainable.