As the Australian borders open, Open Banking gets ready for take off

Australian Open Banking provider Frollo has published the second edition of its yearly industry report, ‘The State of Open Banking 2021’. The report shows an industry that’s ready for take-off, as data availability has accelerated, APIs have proven to be fast and reliable, and people are more excited than ever to get started with Open Banking.

Ready for take off

Over the last 18 months the Open Banking ecosystem has improved measurably, and now delivers the coverage and performance required to build great user experiences.

In the first 10 months of 2021, 70 banks started sharing consumer data and 14 businesses became Accredited Data Recipients. This is an increase from just 5 Data Holders and 5 Data Recipients in 2020.

And significantly, more are getting ready: The industry survey shows 62% of respondents plan to use Open Banking data within the next 12 months, and 38% within the next 6 months.

The new CDR access models announced by the Treasury earlier this year will likely help fintech’s, brokers and financial advisers get started, although there’s still a lot of uncertainty about what these models really mean. 1 in 3 respondents have no idea which of these models they would consider for their business.

The most popular use cases can be grouped into three categories:

• Lending: Income & Expense verification (highly valued by 59% of respondents) and credit scoring algorithms (37%)
• Money management: Multibank aggregation (50%) and Personal Finance Management (50%)
• Verification: Customer onboarding (49%), Identity verification (38%), account verification (34%) and balance checks (30%)

Room for improvement

Although the survey shows a lot of growth, there’s still room for improvement. The biggest challenges that respondents see to achieving their CDR objectives are consumer education & uptake (32%), complexity & clarity of the rules (23%) and cost (18%). The latter two could in part be solved with the new CDR access models like the Affiliate, Representative and Trusted adviser model.

The former is in line with how respondents rate the Federal Government’s consumer education efforts to date (3.9/10) and will likely improve when more use cases are launched and the government starts its consumer awareness campaign early next year.

What’s next?

The Consumer Data Right will cover much more than just accessing the banking products that are currently available. Respondents are keen to see this expansion, especially with various other financial products, and of course Open Banking payments and financial product switching – both of which could be part of what is called ‘Action Initiation’ on the CDR roadmap.

The most popular additions to the CDR roadmap are:

• Financial product switching (83% would find this valuable for their organisation)
• Open Banking payments (78%)
• Sharing data from superannuation products (75%)
• Sharing data from investment products (72%)
• Sharing data from the insurance sector (71%)

Other sectors attract less interest, but over 50% of respondents would still find them valuable for their organisations:

• Sharing Government data, for example health, and Government payments (66%)
• Sharing data from the energy sector (55%)
• Sharing data from the telco sector (53%)

Finally

Looking back, year one of the Consumer Data Right could be considered one big Proof of Concept, in which the ecosystem proved capable of building and delivering engaging Open Banking use cases.

With many of the regulatory, data and technological building blocks in place, the time is right to start building Open Banking powered consumer experiences. Year Two will see access to Open Banking increasing with many more consumers able to access Open Banking in many more places.

Learn more

The full report, The State of Open Banking 2021, includes many more insights, visualised and broken down by organisation type. It also includes interviews with Open Banking innovators Nick Malham (Bank of Queensland), James Wyper (P&N Group), John Sanger (AFG) and Tony Carn (NextGen.Net) about how their organisations use Open Banking and what we can expect in the next 12 months.

Download the report and visuals here: www.frollo.com.au/open-banking/the-state-of-open-banking-2021

The Numbers

Fintechs

• 76% of Fintechs want to start using Open Banking in the next 12 months
• The Affiliate model is most popular with fintechs – 36% would consider it for their business – yet the Representative model would only be considered by 16%
• Fintechs are most interested in multibank aggregation (68%), Personal Finance Management (64%) and customer onboarding (60%)
• More than two thirds of fintechs (68%) are planning to invest in CDR, but expected investments are generally lower as 40% indicate they’re going to invest up to $100,000 over the next 12 months.

Trusted advisers

• Most trusted advisers are familiar with Open Banking (81%), up from 25% last year
• Most trusted advisers either don’t know (44%), expect to spend nothing (13%) or up to $100,000 (19%). This is a clear contrast with 63% of trusted advisers saying they intend to use CDR data in the next 12 months.
• Most popular Open Banking use cases for trusted advisers are Income & Expense verification (63%) and identity verification (56%)
• 38% of trusted advisers think multibank aggregation and Personal Finance Management would be valuable use cases for their business

Banks & lenders

• 89% of banks are familiar with Open Banking, only 44% of lenders
• Banks and lenders place most value in Income & Expense verification (77%), credit scoring algorithms (62%) and Personal Finance Management (57%)
• Unrestricted ADR is most popular (38%), especially with banks & lenders (53%) and technology providers (57%).
• 66% of banks and lenders are planning to use CDR data within the next 12 months