The case for comprehensive credit reporting.

A brief background

In 2014, Australia became one of the last developed countries to introduce "positive" credit reporting into legislation. Until then, credit reporting here was largely a repository of negative information.

The complexity of integrating with credit reporting bodies, and the intricate rules in the Credit Reporting Code, meant the supply and use of comprehensive data stayed relatively weak. The benefits of positive reporting are so compelling, backed by international experience, that in 2021 a new bill made comprehensive reporting mandatory for the big banks, to entrench the practice in Australia.

To keep the transition fair, the principles of data reciprocity were introduced. Through ARCA, the PRDE was developed to define the supply of comprehensive data, the rules of reciprocity and who participates. In practice, though, the complexity and discipline required to participate added significant process and cost, and that has been the single biggest reason lenders stay out of CCR.

The most common objections

Three concerns come up again and again:

• I don't want to hand my competitors an advantage by reporting my customers' full payment behaviour.
• The rules for supplying data compliantly are complex, and the reporting frameworks are too rigid for my sector.
• The benefits only arrive if every competitor supplies the same level of information.

At face value these look valid. But the resistance is largely driven by a fear that the risks and costs outweigh the value.

Fear 1: handing an advantage to competitors

This rests on the idea that anything you present to a bureau is "published" on its platform. It isn't. Only credit providers who have received consent from your customer ever see the information, and only on a case-by-case basis. There's no way for a competitor to derive broad insight across your customers' payment data. What positive exchange does do is let everyone make better credit decisions, and by that measure the largest participants have more to gain than to lose.

Fear 2: the cost and complexity of implementation

Complexity is a real issue, though some credit reporting agencies have worked hard to minimise it, giving providers an easy path to supplying data and help interpreting it. It's worth scanning the market for the best fit. And while most of the industry engages through the PRDE, being a signatory is not mandatory: some agencies operate purely under Australian legislation, and that path can mean significant implementation savings.

Fear 3: coverage of information

Full industry coverage is still a dream rather than a reality, but that shouldn't stop you capturing the value of comprehensive data. More relevant information only supports better decisions. Why hold your own business back because some competitors won't progress?

The opportunity before us

There's room to improve comprehensive reporting, but the existing benefits are substantial, and the future opportunities larger still. Done properly, CCR changes the role of the bureau from rejecting applications to identifying information that supports them.

Start by understanding a consumer's most recent repayment behaviour, then expand your use of comprehensive data once that's working. Engage a credit reporting agency willing to help you interpret and onboard the data, and communicate openly with your customers about where their information sits and how it's used to their benefit. Executed well, comprehensive credit reporting will:

• improve your conversion rate and grow your customer base;
• encourage positive payment behaviour from your customers; and
• build trust in your brand through greater transparency.

Lastly

Whatever your size or volume, CCR can grow your business and help you engage customers in a more progressive way. It isn't something to fear. Embraced well, it produces beneficial results for credit providers and their customers alike.