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4 main factors that are driving open banking in Australia

By Edil Corneille

September 07, 2020

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open banking, API, application programme interface, AustralasiaThe PSD2 regulation in Europe and the Open Banking one in the United Kingdom (UK) are prominent examples of data sharing by banks that have been mandated in these countries. Mexico is another example of a regulatory-driven approach to open banking. In Asian countries, open banking has followed the course of a market-driven approach that is generally not government regulated.

In Australia, the Competition and Consumer (Consumer Data Right) Rules went live on July 1. This has been welcomed by the big 4 banks of the country such as ANZ, Commonwealth Bank, NAB, and Westpac, where they will be sharing their customers’ data with third parties when requested by the customer. New Zealand is pondering whether to develop a consumer data right which will give individuals and businesses greater choice and control over their data. Below are the forces mentioned that are facilitating the adoption of open banking in Australia.

1. Consumer Data Right

In February, the Australian Competition & Consumer Commission (ACCC) declared the Competition and Consumer (Consumer Data Right) Rules which provide legislative force to consumer data-sharing obligations in banking, to become mandatory from July 1, 2020. Following the launch of the rules, consumers can now choose to share their banking data to access more personalised financial products and services.

2. Increased competition

The rise of FinTech has seen many startups, neobanks, among others, enter the financial services space to offer consumers better products and services. In May, it was reported that Judo Bank raised $230 million in fresh equity, thereby valuing the neobank to push through $1 billion and attaining the unicorn status. Incumbent banks such as the big 4 banks (ANZ, CBA, NAB, and Westpac) among others are quickly adapting to change by innovating and participating in ecosystems facilitated by APIs.

3. Empowered customers

All four major banks are capable of sharing their customers’ data with other businesses when requested by the customer, through an API-driven architecture. Individual customers can request their bank to share their data for deposit and transaction accounts and credit and debit cards. Consumers can share their data relating to home loans, investment loans, personal loans, and joint accounts from November 1, 2020. This leads to increased provision of improved financial services offerings from entrants.

4. Reciprocity

A unique feature of the open banking regulation in Australia is that entities participating as data recipients should be obliged to comply with a customer’s direction to share any data provided to them, plus any data held by them that is transaction data or that is the equivalent of transaction data. This means that FinTechs or other businesses will also be obliged to share consumer data with banks when asked for it.

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