Open Banking in Australia is gaining momentum as changes to the Consumer Data Right make it easier for more organizations to participate in the ecosystem. By allowing accredited participants to sponsor other companies or enable them to operate as representatives, the Australian Treasury is reducing regulatory barriers that previously limited participation. The changes could accelerate the development of new financial products and services that use consumer-permissioned data for lending, money management, verification, and other applications.
The regulatory structure for Open Banking in Australia was discussed in our Report “Open Banking Goes Worldwide: U.S. Inroads are Keeping Pace with Global Efforts,” but the Australian Treasury has now amended the Consumer Data Right (CDR) rules so that those currently accredited by the Australian Competition & Consumer Commission (ACCC) can sponsor third parties to become accredited or enable them to operate as a representative. This rule, passed in October, quickly expanded the number of participants in Open Banking.
“Australian open banking provider Frollo’s yearly industry report, shows as data availability has accelerated, optimism for the future of open banking is rising.
According to the survey of 131 financial institutions, 70 banks started sharing consumer data and 14 businesses became Accredited Data Recipients in the first 10 months of 2021.
This is an increase from just fived data Holders and five data recipients in 2020.
In October, Treasury announced amendments to its Consumer Data Right (CDR) rules that allowed increased participation in open banking.
These new amendments allow for current CDR participants, accredited by the ACCC, to sponsor other parties to become accredited or allow them to operate as a representative, cutting much of the red tape that surrounded open banking legislation in Australia.
Chief Operating Officer of Australian Finance Group, John Sanger, said eased open banking restrictions could be a game changer.
‘We view Open Banking as a transformational enabler for future customer experiences and products that may change the way consumers borrow, save and manage their finances,’ Mr Sanger said.
New data from Frollo shows the most popular uses for open banking:
• Lending: Income & Expense verification (highly valued by 59% of respondents).
• Money management: Multibank aggregation (50%) and Personal Finance Management (50%)
• Verification: Customer onboarding (49%), Identity verification (38%), account verification (34%) and balance checks (30%)”
The easing of Consumer Data Right requirements represents an important step in the continued expansion of Open Banking in Australia. Reducing some of the accreditation hurdles allows more organizations to participate while leveraging the experience and regulatory standing of established CDR participants.
Growing participation also increases the potential for practical open banking applications. Income and expense verification can streamline lending decisions, while multibank aggregation and personal financial management tools can give consumers a more comprehensive view of their finances. Open banking data can also support customer onboarding, identity and account verification, and real-time balance checks.
These applications demonstrate that the value of Open Banking in Australia extends beyond simply allowing consumers to share their financial information. Easier access to permissioned data can provide the foundation for financial institutions and fintechs to develop new services, improve existing processes, and create more personalized customer experiences.
The rapid increase in data holders and accredited data recipients indicates that the ecosystem is beginning to expand. As participation grows and regulatory barriers continue to ease, competition among providers could also encourage additional innovation and give consumers more choices in how they access and manage financial services.
Ultimately, the success of Open Banking in Australia will depend on turning expanded data access into products and experiences that deliver meaningful benefits to consumers. The changes to the CDR framework provide more organizations with an opportunity to participate in that transformation.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
