What open banking looks like in 2022

While reports found that consumer understanding of open banking remained low, with more than half (52 per cent) of consumers globally having never heard of open banking, and 61 per cent having never used it – adoption among financial providers and advancements in legislation ensured the industry made significant headway. 

Take, for example, a survey that showed that most fintechs and banks see themselves as the main beneficiary of open banking. Virtually all (99 per cent) of the leaders surveyed believe that open banking provides an opportunity for their organisation to leverage, with 59 per cent seeing that opportunity as having a potentially high impact. And because of that, 66 per cent of financial service providers have already launched or have plans in the works to launch open banking initiatives within the next 18 months.

From a legislative standpoint, 2021 was significant.

Perhaps the biggest announcement was the government’s decision to lower the barrier to entry for fintechs by introducing a representative model, which will come into play from February this year.

Sceptics had cited small fintechs being priced out of the CDR accreditation process as a barrier to CDR entry. To date, the process has been arduous, requiring plenty of person-hours, serving bigger financial providers, with deeper pockets. 

2022: Levelling the playing field

The amendments that come into play in February will accelerate innovation by opening the door for fintechs, regardless of their size, to utilise open data to build products designed to improve experiences for their customers.

February will also see joint accounts brought into the scope of CDR, changing the game for industries like the mortgage sector where most applicants hold shared accounts.  

Despite the pending changes, the open financial ecosystem that we’re striving for will still be in its infancy. Several data sources, including superannuation and investment accounts, will remain out of access and scope of open banking. For any company that utilises these types of data, this drawback will delay a full switch to open banking and make a hybrid model, which incorporates open banking and data aggregation, appealing for some time to come.

Global outlook     

Australia is now a global leader in the open banking journey – particularly given the new changes in model. While Britain was one of the earliest adopters of open banking – kicking off its regime more than five years ago and being one of the first countries to attempt an overhaul of the incumbent financial services industry through open banking – it has still hit a few roadblocks. 

Until recently, The Payment Services Directive II, commonly known as PSD2, required that every 90 days, users had to reauthenticate their permission with every app and provider, including the bank, with which they shared their financial data. This presented a roadblock for consumers and was met with some criticism.

Recent rule changes mean that now users will just need to give their permission to share their data once, albeit still every 90 days – and no longer need to confirm with the bank, just the provider.

Legislation like this has slowed other markets down and Australia is doing well in removing the shackles, striking a balance between careful regulation, but also ensuring that both consumers and financial organisations of all sizes can capitalise on the benefits of open banking.  

Impacting more industries and pushing for more

2022 is a year that could see Australia pull further ahead of the pack, with the Consumer Data Right maturing to start bringing utility data into scope.

From November 2022, energy companies will need to provide consumers with access to their usage and connection data, mirroring the requirements by financial institutions for the “open banking” regime.

In spite of this, we still need to go faster in bringing more financial data into the fold. Investment accounts, superannuation accounts, and more, will need to be added before we realise a truly vibrant open banking market. 

Until then, hybrid models remain vital for fintechs that want to deliver value to their users. Secure data aggregation, layered upon Australia’s CDR regime, leaves our most innovative companies in an enviable position that players in other countries can only dream of. 

Tonia Berglund is ANZ director of product at Envestnet® | Yodlee®

Tonia oversees Envestnet | Yodlee’s data aggregation, enrichment and wellness solutions in Australia and New Zealand with a strong focus on open banking and what benefits an open data ecosystem can bring to Australian banks and fintechs.

With over 18 years’ experience in the finance sector, Tonia has led teams across CBA, Westpac and the federal government, all with the vision of transforming the way industry can innovate and change towards a better banking experience for Australian business and consumers.