Between them, Commbank, ANZ, NAB and Westpac bank almost all² Australian consumers and manage over 80% of all Australian loans⁷. Open Banking legislation has set a target for these ‘deposit taking institutions’ to make our transaction information available to 3rd parties by February 2020. Which means in a few months, services that tap into this data gold mine will be able to tell us which savings products or credit cards are best suited to us, or how much of a loan we can afford, or instant loan approvals, or any innovative service that can extract value from our banking data.
#1 When will the promise of Open Banking be unlocked
The last few years have been eventful for Australian financial institutions, NPP (New Payments Platform) was rolled out in early 2018, providing Australian consumers with instant payments. A year later, in early 2019, the Royal Commission released its damning findings of misconduct by Australian financial institutions. Amidst all this, Open Banking legislation has been progressing and was passed as part of the CDR (Consumer Data Right) bill, officially known as Treasury Laws Amendment 2019 in July 2019.
The CDR (Consumer Data Right) bill will first apply to the banking sector³. Energy companies will need to comply next, followed by telcos.
Open Banking demo
The CDR bill passed in July 2019, and the first phase, or more of a pilot program, of its Open Banking application required the Big 4 banks to make product information accessible by 1st July 2019. This provides access to product information such the product type (e.g. High Interest Savings Account), applicable interest rate, etc; but not actual account transactions themselves.
The first meaningful sharing of data will occur in February 2020, when the Big 4 banks must provide access to customers’ transaction data to authorised data receivers. Which means in a few months we will be able to tap into all of our transaction data for credit and debit cards, deposit and transaction accounts.
Note, this doesn’t include access to mortgage account transaction data yet. A year later, in February 2021 is when the Big 4 will provide access to lending account transaction information and the other banks will begin sharing deposit and transaction product data.
#2 Who’s who in the Open Banking and Consumer Data Right zoo
CDR will be regulated by the ACCC (Australian Competition and Consumer Commission, the OAIC (Office of the Australian Information Commissioner) and a new Data Standards Body⁴.
ACCC will take on assessing which sectors to apply CDR to, setting enforcement and overseeing the Data Standards Body.
OAIC advises on privacy impacts, setting privacy standards and handling consumer complaints.
Whereas the Data Standards Body is tasked with creating the technical standards for data transmission, format and security.
CSIRO’s (Commonwealth Scientific and Industrial Research) Data61 arm has been awarded the Data Standards Body function for the next 3 years. They are developing the technical standards through four workstreams:
- API standards: Create transfer specifications that are safe, convenient and efficient
- Information security: Create standards that protect users
- Consumer Experience: Provide best language and design pattern guides for requesting consumer consent and authentication and authorisation experiences
- Engineering: Demonstrate API standards through usable software artefacts
Who can access banks’ data
Those were just the regulators, let’s look at who the players are.
CDR consumer: The consumer (‘identifiable or reasonably identifiable person, including a business entperprise’⁶) to whom the data relates to.
Data holder: The entity that holds the original data, or data in/directly derived from the original data. To start with, this will be the banks.
Data recipient: An ACCC-accredited person. The accreditation criteria focus on security and privacy safeguards. These will be the innovators looking to translate this data goldmine to value-adding services such as personalised product recommendations.
Designated gateway: A person with the authority to receive and disseminate CDR data on behalf of the members of a designated industry group. Not sure I understand this role.
#3 Early opportunities from Open Banking
We should look to the EU and UK who are ahead of us in implementing their Open Banking standards, as well as review our existing fintech services, to hypothesise what the value propositions of early Open Banking powered products will be.
In the UK fintechs like Yolt provide consolidated views of accounts with multiple banks, and categorise aggregated spend. While Yolt is using Open Banking data to do this, PocketBook was founded in Australia in 2012 and has been providing comparable ‘personal financial management’ (PFM) services by screenscraping online banking accounts. Most consumers don’t realise what powers these PFM tools, and would only care if the security implications were made evident to them.
Personalised product recommendations, such as UK’s Zopa, sounds promising. While we have a variety of comparison sites and tools here in Australia, I don’t believe I’ve seen any that offer personalised recommendations.
Loyalty programs would benefit tremendously from access to Open Banking data. Currently Australia’s second most widely used currency, Quantas points, can be accrued by spending using registered Mastercard credit cards at retailers or hospitality venues participating in the program. Consider the effect of expanding programs like that to reward consumers for spending using any and all payment methods at participating retailers.
Your turn now
In the spirit of data sharing, do let me know your opinions on the promise or pitfalls of Open Banking in Australia. Especially keen to hear from those of you working on fintech products that will use Open Banking APIs.