Published on the 18/05/2018 | Written by Jonathan Cotton
Fintechs are delighted – the big banks, not so much – as open banking arrives downunder…
The Australian government has officially unveiled its plans for an open banking regime, due to go live by mid-next year. Largely agreeing with the contents of the Farrell Report, which recommended adopting UK open banking standards as a starting point for Australia, the government is insisting that all major Australian banks prepare to make debit and credit card data, as well as deposit and transaction accounts data, public by July 2018.
By February 2020 mortgage data will also be made public, with all other applicable data released by July of the same year, after which accredited third parties will be able to access it and, presumably, innovate accordingly.
It’s part of a greater push in Australasia – and globally – for a regulated system to unlock the consumer data currently in the hands of big banks. New Zealand’s Commerce and Consumer Affairs Minister Kris Faafoi, has said he wants to see “more momentum” from industry governance organisation Payments NZ towards an open banking framework.
The group has said it plans to have a standardised piece of technology ready to facilitate open banking, though it won’t be ready until the end of the year “at the earliest”. A pilot project is however currently underway, with ASB, BNZ, Paymark, Datacom, TradeMe and Westpac involved in the development of two payment-related APIs.
“A government-backed open banking framework will be a game-changer for consumers and businesses, along with drive a new wave of fintech innovation and growth,” says FinTech Australia chair Stuart Stoyan.
“Finally, customers will be able to use a regulated system to unlock the power of their own data to get access to financial services better tailored to their needs.”
“They will also be able to easily switch their bank accounts to new fintech challenger banks. Put simply, this means better customer outcomes.”
Chris Michael, CTO of UK organisation Open Banking concurs, telling iStart that open banking systems have huge potential to deliver significant value to retail banking customers by enabling secure/reliable access to third-party apps and offering payments direct from any bank account.
“Having a central directory trust platform framework is essential.”
“Customers will care when companies come into the market offering better services and products,” he says, “including better prices on loans, helping them manage their money better, using predictive analytics to help them avoid getting overdrawn.”
“For business, they’ll get things that help them save money, but the most obvious thing will be the accounting packages that will come into the space. They will provide better, more reliable integration with bank API which are, at the moment, clunky and a bit insecure.”
“A lot of fintechs are looking to provide interesting things in this space,” says Michael, who is in Australia to present at the Ping Identity Identify conferences being held in Sydney and Melbourne. “There’s a whole lot of stuff in the loyalty space and, in the UK specifically, we’re seeing developments around payments – including things like scheduling and payroll – that will be significantly beneficial for business.”
The response from the big banks has been muted. Australian institutions have been accused of trying to delay to the rollout (characterising the timeframes suggested as “infeasible”), with open banking reforms expected to force downward pressure on lending costs.
Michael says that one of the keys to a successful open banking regime is the development of an open banking directory, to provide identity confirmation during the transaction process.
“It’s really important that third parties and banks have absolute certainty about who they’re talking to and customers have somewhere to go to verify things,” he says.
“Having a central directory trust platform framework is essential.”
