More than 35% of the world, or around 70 countries are either doing or discussing some version of open banking1. While the goal is generally the same – to enable data sharing with trusted third parties to improve the customer experience, the way countries are implementing open banking standards and the scope of regulated data is different.
As a result, it can be difficult for companies to move forward and leverage consumer financial data sharing across borders.
To shed light on the requirements and help companies leverage the opportunities, we hosted a webinar on the topic: Supporting Global SMB Growth and Transcending Borders with Financial Data, which you can watch on demand here.
In the webinar, we interviewed a few FinTech innovators from the UK and Australia, who shared how they accelerated business growth with open banking API-based data connections.
Here are some of the highlights:
Oliver Dix, the founder of Prift in London, explained how open banking is at the core of Prift’s financial well-being solution for employees. Through open banking API connections, Prift users can see all of their finances in one place. Open banking data connections are also enabling Prift to deliver personalised financial guidance and product recommendations to help their users make more informed financial decisions and save even more.
What does open banking mean in the UK?
Kat Cloud, Open Banking Compliance Principal Director at Envestnet® | Yodlee®, explained how open banking in the UK was drafted on top of Europe’s PSD2 (the Revised Payments Services Directive) which requires banks to unlock data so it can be shared with trusted third parties. UK open banking takes PSD2 a step further, requiring the nine largest banks (CMA9) to work together to create a standardised API for sharing data.
She goes on to say how data shared in the UK per open banking mandates include payment accounts, some savings accounts, and credit cards. And that specific types of data shared include account sort code, account number, account holder name, balances, and 90 days of transactions. Direct debit setups or reoccurring payments coming in and out of accounts can also be seen under open banking.
Further, Kat shares that there are two pathways for accessing open banking data in the UK:
- Firms can get their own regulatory license with the Financial Conduct Authority (FCA), which is the UK regulator. Kat Cloud emphasised that becoming a licensed entity takes time and requires a lot of paperwork. PSD2 and open banking require providers to have a compliance program, a data protection program, complaints procedures, and more before applying for a license.
- The agency model is the other option that firms have. At Envestnet | Yodlee, we have a license with the FCA.Firms that can become our agents can start accessing and using open banking data faster.
What does open banking mean in Australia?
Dr. John Harrison, Senior Product Manager of Open Banking for Australia and New Zealand at Envestnet | Yodlee, discussed how in Australia, open banking is the first sector of the Consumer Data Right (CDR). CDR sets the consent-driven, data-sharing framework. As in the UK, open banking is expanding into open finance and other sectors.
Harrison explains a broad range of products in Australia are currently covered under open banking, including bank accounts, credit cards, mortgages, term deposits, loans, lines of credit, and more, for individuals and businesses of all sizes. Similar to the UK, account information, transaction information, and customer information are included too.
Open banking opportunities in Australia
Jon Shaw, CEO of Moneysoft, an organisation that provides personal financial management software to financial advisors, discussed how open banking is enabling Moneysoft to pull in data to help consumers automate household finances, get financial planning assistance, and save for the future. Moneysoft is Australian-based and has offices in other territories as well.
One of the biggest opportunities Moneysoft sees for innovation with open banking is in the enterprise space. “The necessity of sharing passcodes, usernames, and passwords is not something that many businesses feel comfortable with, particularly in risk-averse industries like pensions and superannuation in Australia,” Shaw says. “So the fact that we’ve now got a government-regulated and mandated method of collecting and sharing data is very exciting and opens up a lot of business opportunity.”
The regulators in Australia are paving the way for superannuation funds and retirement fund data to be more available to members. There are 15 to 20 million superannuation members who will be given access to financial advice through their retirement funds, Shaw says.
The accuracy and reliability of open banking data also open up opportunities for artificial intelligence and machine learning and generative AI, which requires accurate data to work at optimum levels, Shaw says.
What’s needed to access open banking data in Australia?
Just as in the UK, there are two main pathways to gaining approval process to access open banking data in Australia3:
- Accreditation is the more complex pathway, where approval from the Australian Competition and Consumer Commission (ACCC) is required. This process is similar to the UK’s, and appropriate policies, governance, complaint processes, and more are needed to be accredited.
- The CDR representative model is somewhat like the UK’s agent model, and firms can gain access to open banking data under Envestnet | Yodlee’s license. As John Harrison shares, Envestnet | Yodlee assesses firms to ensure they have the appropriate cybersecurity controls and meet other requirements. He goes on to state that generally, we recommend the CDR representative model for our customers, as it’s a much quicker route to get live, and can help our clients manage risk as well.
Though the two pathways noted above are suitable for many customers, our team works with every client to determine if another pathway could work better based on their specific use case.
What are the next steps for open banking?
In both the UK and Australia, open banking is expanding into open finance. In the UK 2, open finance will enable data from pensions, mortgages, and insurance to be shared via APIs. In Australia3, open finance will start with non-bank lending, which includes buy now pay later, credit cards like American Express, various loan providers, and more.
Open banking in Australia will eventually encompass investments, superannuation retirement funds, and perhaps other areas like insurance in Australia, Dr. Harrison says. The CDR isn’t restricted to finance or banking, so it’s already available for energy data and consumers can get their energy usage and details on their energy plans through the CDR. It’s likely that there will be an expansion in telecommunications in the medium term as well, Harrison notes.
The Australian government is committed to improving the state of the open banking and open finance regime. Recently, the government conducted a statutory review of the Consumer Data Right and outlined a set of recommendations to make it easier for businesses to get on board with open banking and for consumers to use the service3.
How will you make the most of open banking?
All four thought leaders in the webinar shared what would be on the top of their wish list for open banking and what they’d change or approve if they were in charge for a day. To hear their full answers, watch the webinar.
And remember, when you sign up with Envestnet | Yodlee, you might be talking to the UK or Australia team, but you’re actually signing up with Yodlee Global. So if you want to expand operations from Australia for example, to another country, we’d be happy to work with you to help break down the regulatory barriers for accessing data across borders to expand into our other supported territories.
“…Global access to data and global reach is one of the reasons why we’ve stuck with Envestnet | Yodlee through our entire nine-year journey... rather than going to separate suppliers that have local capabilities It’s a massive advantage, and it opens up a lot of opportunity.” - Jon Shaw, CEO, Moneysoft
