The document discusses open banking standards in Australia and the role of LIXI (Lending Industry XML Initiative). It notes that while LIXI has helped standardize lending data, its standards are not as widely adopted as PSD2 in Europe due to a lack of regulatory mandate. For open banking to be fully realized in Australia, all financial institutions need to adopt common standards for sharing customer data and transactions. The article explores whether Australia should look to global standards like PSD2 or create its own national standard.

1. Open banking, will LIXI
standardisation lead the way?

2. In Europe and the UK over the last several years, governments have been
creating policies that force financial institutions to share customer account
information with each other via standards such as PSD2 (Payment Services
Directive 2) and the Open Banking standard. While initially some institutions
saw that intermediaries, such as FinTech startups, could quickly and easily
become a threat to their business, the upside is now becoming more
apparent as new partnership models are emerging driving innovation and new
business opportunities.
Australian policy makers are starting to follow this trend and a lower house
parliamentary committee late in 2016 recommended that banks be forced to
share account and transaction data about their customers, similar to what
has been mandated in the UK and Europe. A target date of July 2018 was
recommended for the scheme to be implemented.
" new partnership models are
emerging driving innovation and
new business opportunities "

3. Benefits
With standardised APIs and customer data available, there are several benefits
that are immediately apparent:
1. The playing field is level for new entrants into the financial services
market, encouraging competition
2. Customers have control over their data rather than the financial
institutions and can choose whether it be shared, when and with whom
3. Customers are expected to find it easier to move between financial
service providers and
4. Innovation is driven not around how to obtain data, but what to do with
it when it is available.
How can data standards change the financial
services landscape?
" customers have control over their data
rather than the financial institutions "

4. " Only when a standard is embraced
and implemented by all participants in a
transaction can its benefits be fully realised "
Are there prominent data standards in Australia?
LIXI
In Australia, LIXI (Lending Industry XML Initiative), a not for profit organisation
founded in 2001, has long been a vocal advocate of driving standardised
means of conveying data relating to lending services. While standards such
as PSD2 and the Open Banking standard emerging in other international
markets are less restrictive in terms of segmentation, LIXI has been able to
induce competitors to work together to increase efficiencies and drive down
costs. It is this co-operative 'working group' approach that places LIXI in a
unique position to branch out into other areas of financial transactions and
define new data standards and potentially APIs for the Australian market.
Contrasting sharply with its European PSD2 counterpart, LIXI is not driven by
government regulation and relies on the funds it raises through membership
license fees. This crucial lack of a push from policy makers means that the
LIXI standards are not nearly as widely adopted as PSD2 is and will be. At
present, LIXI members pay for the privilege of using and contributing to the LIXI
standards and cannot be assured that other service providers or institutions
that they deal with also implement the same standards. This undermines the
benefits LIXI can bring when compared with the enforced adoption approach of
PSD2. Only when a standard is embraced and implemented by all participants
in a transaction can its benefits be fully realised.

5. Innovation drivers
In the lending industry, LIXI continues to drive and facilitate innovation relating
to data standards. In May 2017, a new standard for the passing of credit
decision data between origination platforms and credit decision platforms
was released. The CDA (Credit Decision Australia) standard was built on the
LIXI 2 standard and is the first of its kind in Australia.
Sandstone Technology, Decision Intellect and Bendigo and Adelaide Bank
worked collaboratively to each bring their experience and knowledge together
to craft the new standard via a working group. What this will mean for financial
institutions that make decisions around credit applications according to their
policies will be that they have a standardised means of doing so, allowing
them to more quickly and painlessly change policies and decision engines
as needed.
For the decision engine providers, it means implementations can be completed
more quickly and cost effectively so they can essentially plug their solution
into any financial institution that adheres to the LIXI 2 CDA standard.

6. Looking forward
LIXI are in the process of producing more standards and are now looking at
diversifying from strictly using XML for data formatting into other technologies
such as JSON. Financial institutions and service providers can look forward
to a more comprehensive set of standards that allow them to communicate
more effectively with lower implementation costs and issues.
This nicely complements the current trend of publishing services in the cloud,
in the age of exploding APIs but largely without standardisation at an industry
level. The currently published LIXI 2 standards are:
• CAL(CreditApplicationsforAustralianHomeLoanandEquipmentFinance)
• CNZ (Credit Applications for New Zealand)
• DAS (Document Preparation and Settlement)
• CDA (Credit Decision Australia)
" Australia now faces the challenge of
choosing a standard that covers not only
lending, but all financial services data "

7. Two new LIXI 2 standards were largely defined as part of the process of
crafting the CDA standard and will be released shortly:
• LMI (Lenders Mortgage Insurance)
• VAL (Valuations)
Sandstone Technology will soon formally request that a new LIXI 2 standard
be created for the calculation of serviceability; another key function in
credit origination.
The next logical step after creating a data standard is to create the services
that carry this data. Creating a standardised API can take efficiency and ease
of integration to the next level and move financial institutions and service
providers closer than ever to the utopia of true 'plug-and-play' integration.
For example, sharing of account details and transaction data is already likely
to be very close in terms of data requirements and service definition even
without a standard API there just isn't a lot of differentiation in such data.
It makes sense then, to standardise not just the data, but how it can be
accessed uniformly.

8. Australia now faces the challenge of choosing a standard that covers not
only lending, but all financial services data. Should we be thinking globally
and embracing standards such as PSD2 or the much older and possibly
more mature IFX? Or should we create a standard that makes sense for us
in Australia, potentially working with organisations like LIXI that have well
established roots and relationships already in place? It is these questions and
others like them that we need to answer and act on quickly to transform the
financial industry in Australia to enable innovation and push it toward a better
landscape to work in the future.
Standard Data & APIs

9. Building better banking experiences
Jeff Saul is Sandstone’s Lead Integration Architect and has been with Sandstone for
more than 16 years. He holds a Bachelor of Mathematics degree from University of
Wollongong and has been integrating financial systems for 15 years. Jeff has vast
experience working with financial software across various channels for 23 years. He is
actively participating in shaping and driving industry standards including the recently
published LIXI 2 CDA standard.
About Sandstone Technology
Sandstone Technology is an international FinTech with headquarters in Sydney,
Australia. The company was founded by former IBM employees Bob Hall and
Violet Vu 21 years ago. Sandstone’s focus is to build better banking experiences;
for consumers, for bank staff and for business customers.
Success and deep lending and banking domain expertise have taken Sandstone’s
end to end digital lending origination and banking solutions from Australia to New
Zealand, the UK, Vietnam as well as Papa New Guinea. Sandstone has successfully
made over 400 deployments globally.
About the author
© Copyright Sandstone Technology - June 2017
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