Voice of the Industry

The state of Open Banking in Australia in 2021

Wednesday 22 December 2021 09:46 CET | Editor: Claudia Pincovski | Voice of the industry

As Australian Open Banking is up and running, Scott Farrell explains how it became a critical part of the design of Australia’s digital and data economy 

Australian Open Banking is up and running. Since its launch in July 2020, customers of the largest Australian banks have had the right to share their transaction data with accredited data recipients. It now includes savings accounts, credit card accounts, loan accounts and mortgages, as well as transaction accounts. Open Banking applies to other Australia-based authorised deposit-taking institutions too.

Already 16 banks, with their 16 additional brands and representing 85% of Australia’s household deposits, are active as data holders. Thirteen data recipients have been accredited and are active, including fintechs, accounting platforms, and comparison providers. One of Australia’s smaller banks, and Australia’s largest bank, are already accredited to receive customers’ data from other banks, at their customers’ request. There are many more entities, large and small, going through the ongoing accreditation process. As Open Banking is only the first part of Australia’s economy-wide consumer data right (CDR), accreditation also opens pathways to participating in customer-driven data sharing in other sectors, such as energy and telecommunications.

Commencement of Open Banking has spurred new combinations between fintechs and banks to leverage experience and expertise. For example, one leading fintech has announced a partnership with one of Australia’s largest banks to use the fintech’s CDR gateway to receive consumers’ financial data from other banks’ customers.

These types of services from fintechs are also used by smaller banks and credit unions to enable them to offer better digital experiences to their customers. Another fintech is working with a regional bank to assess and process account and mortgage applications. Comparison providers have also teamed up with fintechs to use their CDR technology and expertise. A further leading fintech has leveraged its CDR technology to remove technological barriers experienced by more than 20 banks and credit unions that need to participate in Open Banking. Other accredited fintechs combine CDR connectivity with other methods of data sharing for their customers.

Even as participation in Open Banking grows, its scope is ambitiously expanding:

  • Beyond data sharing. Open Banking in Australia was initially created to enable the sharing of data by customers but not to initiate payments (i.e. ‘read’ and not ‘write’). A recent Australian government inquiry into consumer data right’s future directions recommended that this functionality be extended to include ‘action initiation’. This is to enable customers to authorise accredited entities to take actions on their behalf, including to initiate payments and to open or close accounts, like a ‘digital power of attorney’. Detailed work is underway to determine how this should be implemented. Further recommended changes to expanding CDR’s functionality include a simplified integrated consent framework and facilities to enable consent management services.

  • Beyond Open Banking. Open Banking in Australia was designed and created to be the first stage in an economy-wide consumer data right under a single technological, legal, and regulatory framework. The legal and regulatory structures for CDR are already in place. The technical work to include data sets in the energy and telecommunication sectors has commenced and is ongoing. A strategic assessment is currently being conducted by the Australian Government to determine the priorities for the next data sets to be included, whether from financial services, from other parts of the economy, or from the government itself.

  • Beyond standalone system. New flexibility for ways to participate in Australian Open Banking is being introduced to enhance specialisation and cooperation in the CDR ecosystem. Improvements include allowing entities to be ‘sponsored’ into CDR by others (using CDR’s tiered accreditation regime), more flexible outsourcing arrangements, the appointment by accredited entities of representatives to provide CDR services, the sharing of data with trusted advisors, and the sharing of insights with unaccredited entities. Rule changes to make this happen have been released, with aims to grow the Open Banking and CDR ecosystem quickly and safely. 

  • Beyond Australia’s borders. Work has commenced to align Open Banking in Australia with similar frameworks overseas. This includes standards development as well as principles of application. The clearest opportunity for alignment arises with the very recent announcement by the New Zealand government that New Zealand will develop a similar consumer data right framework to that which has been established in Australia.

All of this development has taken place throughout the pandemic disruption of the last 18 months. Instead of delaying implementation, it has accelerated the need for Open Banking and CDR in Australia. Indeed, Open Banking and CDR have become critical parts of the design of Australia’s digital and data economy. They are intended to provide a sustainable, robust, and resilient foundation for Australian consumers and businesses to engage with, and safely benefit from, the exchange of data and the increased productivity it supports.

King & Wood Mallesons has contributed to the Open Banking Report 2021. Click here to download the report.

About Scott Farrell

Scott Farrell is a senior partner of King & Wood Mallesons with more than 25 years’ experience in the legal, regulatory, and policy structure of financial markets, systems, and technology. Scott led the two inquiries for the Australian Government which designed and developed Australia’s Consumer Data Right.



About King & Wood Mallesons

Recognised as one of the world’s most innovative law firms, King & Wood Mallesons offers a different perspective to commercial thinking and the client experience. As a leading international law firm headquartered in Asia, we help clients to open doors and unlock opportunities as they look to Asian markets to unleash their full potential. Combining an unrivalled depth of expertise and breadth of relationships in our core markets, we are connecting Asia to the world, and the world to Asia.

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Keywords: report, Open Banking, data, fintech, banks, financial data, digitalisation
Categories: Banking & Fintech
Countries: Australia
This article is part of category

Banking & Fintech

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