Why Australia’s open banking regime is set to soar!
Since going live on 1 July 2020, Australia’s open banking regime has catalysed conversations, enabled change, and inspired financial innovators build fintech apps.
It’s also helped banks to better understand their customers ... and their competitors.
The ground-breaking Consumer Data Right (“CDR”) is both legislation- and data-led. As data holders, banks are required to make consented consumer data available to accredited third parties via authenticated channels, and enterprise-wide product reference data publicly available via open APIs.
Envestnet® | Yodlee® is committed to the success of open banking in Australia.
We’ve been involved since it began, when the federal government commissioned Scott Farrell in 2017 to write his seminal review. This laid down the blueprint for the economy-wide data sharing regime and established its core goals, namely, to improve consumer confidence, choice, and convenience.
In February 2021, Envestnet | Yodlee became an unrestricted Accredited Data Recipient.
We are proud to support financial services firms operating in Australia – both traditional and innovative - to access open banking data and deliver a wide range of use cases, including personal lending, mortgages, wealth creation & management, SMB cash flow, and more.
Several years in, the collaborative efforts of government, regulators, banks, fintechs and industry associations have built the strong foundations of open banking in Australia. We’ve passed the initial roll-out phase and the participation numbers are growing.
Now it’s all about fine-tuning the details and scaling, so we can make open banking as effective as possible in delivering on its goals.
Here’s what’s getting us excited for 2024!
New use cases powered by data analytics
Classic open banking use cases include account aggregation for personal financial management tools, where consumers benefit from the convenience of seeing all their bank information in one place.
Exciting new use cases go one step further and analyse the data to surface insights. This allows consumers to benefit from greater confidence, as ultimately, it’s what happens with the data that really matters.
At Envestnet | Yodlee, we’re excited to be enabling clients to deliver use cases that support financial wellness, for example, by pre-emptively checking for mortgage stress due to interest rate increases and nudging consumers to stay on track with their wealth creation goals.
In 2024, we’ll be bringing more of our data analytics products to the Australian market, including the new Yodlee Credit Accelerator, an API product that accesses traditional and alternative data to provide a clear and holistic view of consumer credit throughout the credit lifecycle.
Better user experience for consumers and businesses
Several key Treasury consultations in 2023 explored how the CDR Rules could be amended to remove friction being experienced in certain situations such as joint holder and business bank accounts1.
The consultations also canvassed how there could be a more seamless consent experience without quite so many screens and clicks to be navigated. Also, how consent could be given for a longer duration and without manual processes and physical paperwork being involved.
While we are still awaiting the outcome of those consultations, if adopted, the recommendations will likely make CDR more accessible to more people.
A new era of open finance and action initiation
As CDR is an economy-wide initiative, it’s set to expand further in scope and functionality2.
In 2024, that means CDR will include an initial cohort of large non-bank lenders, with more non-bank data holders coming into the regime in 20253.
The inclusion of more datasets is expected to deliver a positive impact.
Existing personal finance apps will be able to give consumers a better understanding of their finances.
The lending use case will be significantly expanded. At the moment, CDR can only access bank loan data. As a result, there can be missing pieces of a consumer’s financial picture if they have a mortgage or a car lease from a non-bank lender, or use buy-now pay-later services.
We expect a lot more people will also start to use the term “open finance” rather than open banking.
Further down the track from 2025 onwards, we are also excited for the possibility of action initiation, for example, for payments and switching. This year, we expect to learn more about CDR’s roadmap to write-access.
An exciting time for Australia’s ground-breaking CDR regime
At Envestnet | Yodlee, we are excited by the opportunities for expansion of Australia’s CDR into open finance because it increases the availability of data and encourages fintech innovation for the benefit of consumers.
With so much opportunity in CDR, it can be hard to know where and how to start, so if you’d like more information, please reach out to our team.
Sources
- Treasury consultations from August 2023 into a) CDR Consent Review and b) Operational Enhancements https://treasury.gov.au/consultation/c2023-434434-consent
- https://www.cdr.gov.au/rollout and https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6950
- CDR Rules - expansion to the non-bank lending sector/ https://treasury.gov.au/consultation/c2023-434434-expansion
