While the Consumer Data Right is still in the early days of its evolution, Open Banking can no longer be called new. The iterations of the initial roll-out are behind us, and the CDR has been extended to a new industry, with Open Energy now in progress.
But, although the initial Open Banking roll-out is ‘complete’, it’s still really only the beginning for the regime, with many new use cases on the horizon and the groundwork laid to deliver improved outcomes for both businesses and consumers.
Opportunity knocks. The regime has good coverage (99.7%) of household deposits and financial products, scores of Accredited Data Recipients (ADR) and even more CDR Representatives. And the introduction of the Trusted Adviser model in 2022 has accelerated the take-up of Open Banking by brokers, financial advisers and accountants.
There are innovators already leading the charge, with a steady flow of early adopters being first to market with offerings that deliver value to customers, and there are many more launching a proof of concept.
That said, many businesses are still taking their time, exploring potential opportunities, looking for where the return on investment will be, and even waiting for other businesses to prove test cases for using CDR first. Though, that’s not necessarily surprising – a regime the size and scale of Open Banking doesn’t grow overnight. It’s also a government initiative, but it relies on business buy-in, which takes time. Also, many of those businesses (the banks) are taking a breath, having just got through compliance.
However, the government does play a role in driving growth, and realised it may have shifted focus to other sectors too quickly. We saw this when a proposal to expand into the non-bank sector made in December 2022 was later delayed, giving time to bed down the existing regime. The expansion of the CDR into other sectors is also on hold for now to ensure the CDR in banking is working as effectively as possible.
Some talk about the delay as giving Open Banking time to mature, but what it really does is give it an opportunity to accelerate.Tony Thrassis, Frollo
Treasury has now released a number of consultation papers that include a design paper proposing consent changes, operational enhancements and a discussion paper on screen scraping, as well as the draft rules for extending the scope of the CDR to Non-Bank Lenders. These are all aimed at improving functionality and transparency in the CDR framework. Additionally, the Australian Competition and Consumer Commission and the Office of the Australian Information Commissioner are treating data quality as a priority area for compliance and enforcement activities. In other words, they’re doing the work that always needed to be done.
Some talk about the delay as giving Open Banking time to mature, but what it really does is give it an opportunity to accelerate. Many of the issues are expected to be solved with the changes proposed in the current consultations. Chiefly, addressing how CDR data can pass between participants more easily is needed to ensure CDR can be an alternative to screen scraping for every use case.
The pending arrival of non-bank lending will also help, encouraging adoption and expediting the withdrawal of screen scraping from some sectors.
We’re also finally seeing the Big Four start to engage with Open Banking beyond their Data Holder responsibilities. The Commonwealth Bank of Australia (CBA) has partnered with our parent company, NextGen, to become one of the first lenders to enable Open Banking for mortgage brokers in NextGen’s loan lodgement platform ApplyOnline. The partnership is set to redefine the home loan application experience for brokers, lenders, and customers alike.
Next year will continue to bring new opportunities, and the regime will solidify as more and more use cases are added and consumer awareness grows. Lending, in particular, is primed to become a widespread use case and drive consumer awareness. Expanding CDR to the non-bank lending sector and the improvements being proposed in the consultations should help remove obstacles and facilitate uptake. And Action Initiation, when it comes, has the potential to ramp up usage, as we can see in the UK.
From there, the sky’s the limit.
This article is part of ‘The State of Open Banking 2024’, an industry report by Open Banking provider Frollo. The report provides a pulse check of the Consumer Data Right industry and an overview of exciting new use cases.