The loan approval comes less than one day after the launch of open banking and signals a new milestone under Australia’s open banking regime.

Open banking operates under the Consumer Data Right (CDR), which gives Australian consumers the rights and protections to share their data securely. Under the first phase of open banking, any customer of Australia’s big four banks can request for their account data to be shared with an authorised third-party service provider. In exchange for their data, consumers can access personalised financial services and products that are right for them.

Until now, the benefits of open banking have yet to be proven and consumer education on open banking has been lacking. The success of open banking is contingent upon the willingness of Australian consumers to share data and the first loan approval under the regime gives Australian consumers a look into the value that can be generated with their data.

With the approval of open banking’s first loan, Regional Australia Bank has demonstrated the value exchange awaiting consumers who consent to share their data and what this process could look like. The customer-owned bank received an online personal loan application request on the evening of July 1 and with open banking, the applicant was able to securely share over 3,000 transactions as part of their application, in seconds.

According to the applicant, sharing the data was a simple process that took no longer than six minutes end-to-end and the best part? The pre-filling of their expenses. This is a far cry from manual loan assessment processes which require applicants to guess their expenses and gather bank statements. Behind this process is Basiq, a fintech specialising in insights derived from financial data. With Basiq’s data analytics capabilities the applicant’s expenses were analysed into spending categories such as “transport” and “recreation” in seconds, allowing Regional Australia Bank to make an automated loan decision based on a clear understanding of the individual’s financial position and spending behaviour.

A frictionless loan approval process is just one of the many use cases that can be achieved with open banking. Customers of the big four are now able to easily access financial products and services outside of their main provider. This opens up opportunities for fintechs who can leverage a full financial picture of a customer in creating unique lending and digital banking solutions that better meet the needs of customers. In combination with the lowered cost of switching, incumbents will face increased pressure to provide more competitive and innovative products to retain their customer base, with consumers being the ultimate winners.