Open banking 1 year on: how Australia’s new world of data is changing finance

Just over a year into the Consumer Data Right (CDR) regime and Australia is now beginning to understand the competitive advantage this new world of data can offer.

Designed to give consumers greater access and ownership over their own data to increase competition, CDR has first been introduced to banking, to be followed by energy in 2022 and likely telecommunications.

Adatree co-founder Jill Berry

In its 12 months, the industry has come further than it is often given credit for. With huge burdens on technical compliance and investment in the right technology for accreditation, delays have been commonplace.

As the CDR matures, the number of companies applying to become accredited have gone through the roof across banks, lenders, fintech, insurance, superannuation, government and payments, and these initial hurdles will likely be seen in history as simple teething problems.

The next phase of data sharing

This July 1, 2021 was a key milestone in the data sharing regime, with all non-major Authorised Deposit-taking Institutions (ADIs) poised to share CDR data for all banks, credit unions, mutuals and brands (like Coles Credit Cards).

While there has been some delay and exemptions around this deadline, this really is a key turning point where more Australian consumers will be able to take ownership of their data. For companies, the real competitive edge of Open Banking is about to be shown.

However, many of the non-majors are facing serious hurdles. Westpac has estimated Open Banking will cost more than $200 million for the bank to implement. That’s a huge spend for a major Australian company, but the smaller operators can not afford this level of investment despite having to meet the same data sharing and conformance requirements with a team of 1-4 tech staff versus 100s at the major banks. In short, despite the same requirements for all, it’s not a level playing field to enter the CDR.

All this means the next 12 months will be a huge challenge for the players outside the big four banks. We see this first hand in our work with 23 mutuals getting them ready to share data.

Leveraging Data

With the non-majors entering the CDR, the conversation is shifting from becoming accredited and compliant to competitive advantages.

Australia has gone swiftly from two active Accredited Data Recipients to five, including CBA and Adatree, with many more in the pipeline with proof of concepts in beta mode.

Reaching this accreditation milestone is not a simple task and maintaining it is crucial to a functioning regime.

In a possible window to the future, CBA is the dark horse of CDR with investments in Energy (Amber), Telco (Tangerine) and BNPL leveraging Open Banking. In a new world where data can easily be shared and consumers have more power, it seems that big players will still be formidable competitors and use CDR to springboard their market growth and engagement.

But the benefits will flow to smaller players and disruptors alike. We are now seeing exploration and development of new and different ways to operate in financial services with a focus on customer benefits, decreased operational costs and increasing revenue and customer acquisition.

Although the majors have deeper pockets, CDR will allow all to create smoother and smarter experiences and propositions.

Decreasing the barriers to entry

With high levels of compliance and security regulations, entering the CDR has been seen, particularly from fintech, as a high barrier to entry.

We had consultation papers & draft legislation published this past year, showing the feedback loop from industry to government and making suitable, fit for purpose changes to uphold high security requirements while decreasing barriers to entry for more companies. This is a positive step for competition.

One key noteworthy change has been the Data Standards Advisory Committees for Banking & Energy have been condensed into one committee, showing the commitment to economy-wide standards as the latter prepares to share data from next year.

Bright path ahead

Australia has thus far been laying the groundwork for the real potential of CDR to come through. The ideas are there if you know where to look.

We will see in the near future new access models coming through meaning more participants and more ethical data-driven propositions in market.

With intermediaries, the time from idea to product or service accredited and active in the CDR will be slashed. And the end consumer will be the one that actually wins out of this.