Open Banking is moving forward

It’s the big open banking decision – should your organisation go it alone, or is a third party the way to go? illion Open Data Solutions‘ GM Jarrid Ohanessian outlines the options open to brokers and lenders.

With the Consumer Data Right (CDR) now live, customers can share their banking data with third party institutions such as banks, credit unions, fintechs, online lenders and money management apps. This is open banking, a regulated way for consumers to share their data, giving them greater control and encouraging widespread competition. It’s likely that by the end of 2021, we’ll all be a part of it.

It’s not just good for customers – it’s good for lenders and brokers too. For brokers and lenders, open banking means customers can share their banking data at the tap of a button.

Lessons from the UK

Open Banking requires full utilisation and cooperation from all players, and this was pioneered in a big way in the UK. As a result of the UK’s 2018 Second Payment Services Directive (PSD2), hundreds of banks and fintechs have joined this new ecosystem, with more than 2.5 million consumers and businesses now using open banking products.

With a strong and centralised regulatory framework and strict enforcement of technical and customer experience standards, the UK’s open banking system directly inspired the Australian ecosystem. However, the UK’s open banking system has been operational for three years now but it’s still very much a work in progress. To encourage higher participation and more data sharing and innovation, consumer education and trust will be the key to the successful implementation of open banking in Australia.

How does open banking work in Australia? Open banking will take us beyond existing technologies to a regulated environment where all big banks and lenders are part of the same digital ecosystem. In Australia, it does this through the Consumer Data Right (CDR). Now overseen by the Treasury, banking is the first industry where CDR gives customers control over their own data.

There’s a standardised signup flow and customer experience for all credit providers. Customers choose which data to share, which providers to share with and for how long, and they can revoke this access at any time. Putting customers in control and creating a standardised customer experience not only makes it easy for customers to use, it inspires trust in open banking itself.

Getting accredited

Gaining accreditation for direct access to open banking data is currently a lengthy and expensive process, which includes meeting the ACCC’s obligations, completing a submission and a review process. Once accredited, you can then either build your own infrastructure or partner with a third party. We’ve been through the process ourselves – twice in fact – and it’s definitely something we’re keen to help our customers navigate.

We’ve written before about the significant cost accreditation imposes on businesses – this risks the benefits of CDR not being fully realised. Spending an average of $250,000 and many months to get accredited, especially at this early stage, can give organisations a first mover advantage, but many organisations will not have the resources to do this. illion’s Open Data Solutions and Credit Simple are now ADRs – Accredited Data Recipients – a process that took us nearly 4 months from end-to-end and involves ongoing hosting and maintenance as well.

The ACCC agrees that this cost does present a barrier in the uptake of open banking, proposing a second tier of ADRs known as ‘Trusted Advisors’, with a less involved accreditation process and a restricted level of data access, but this could still be a long way off. We’ll continue to advocate for all users of open banking data to have all the information that is needed for them to serve their customers.

Using an intermediary

Although the rules and legislation are not yet clear for accreditation, it makes sense that once you are ready to consume open banking information, you should focus on growing your business, rather than building the technology that is required to access this information.

One option is to consider partnering with an intermediary like illion Open Data Solutions – we can provide a full open banking solution and manage the process on your behalf. Because the user flow and customer dashboard are standardised, we’ve built a product that can be white labelled for your businesses with significantly less time and cost involved and no ongoing maintenance, but with rigorous security and technical support provided.