What’s next on Australia’s transition to an Open Banking future?

By Brad Drysdale, APAC Field Chief Technology Officer at Kong

Launched in mid-2000 with the introduction of Consumer Data Right (CDR) regulations, open banking is beginning to change the shape of Australia’s financial industry.

Designed to make it easier for consumers to switch between institutions and take advantage of new products and services, open banking mandates how financial data must be made available to authorised third parties. The underlying logic is that, if it’s easier for people to switch between providers, better competition and innovation will occur.

Open banking is being rolled out in a series of phases. From July 1 this year, the nation’s big four banks had to make available information relating to a range of items including customer savings and cheque accounts, home and personal loans, lines of credit, and leases.

All other banks and financial firms need to follow a similar path and make data available on or before February 1, 2022. 

This is just the beginning

Once open banking has been fully rolled out, consumers are likely to become much less wedded to a single bank. They’ll be able to open and close accounts with ease and readily shop around to compare different products. When you combine this with the increasing use of electronic payment options such as Apple Pay and Google Pay, levels of innovation will rise even further.

Consumers will also be able to take advantage of the growing number of services that allow them to obtain a clearer view of their financial positions. The services will request data from every financial institution a consumer uses and present it in a single portal view. This will allow people to accurately assess their complete financial situation and make changes as required.

The role of APIs 

The end result of the open-banking revolution will essentially be the decoupling of financial products and services from the underlying systems on which they run. Just as people don’t need to care about the servers powering their Facebook session, they also won’t need to be concerned about which underlying bank is actually powering their financial services.

This shift is being made possible by the ongoing development of Application Programming Interfaces (APIs). Throughout the world, APIs are being used to evolve financial institutions into platforms and they do this by allowing systems that were never designed to be linked to efficiently and securely share data.

The trend is similar to that which took place in the early days of email and SMS. Initially, people could only communicate and interact with people who used the same service provider. Then, over time, the providers linked their platforms, and the rest is history.

None of this open banking revolution would have been possible without APIs, as the efficiency and security that they deliver to the data-sharing process is vital.

Beyond finance

The principles underpinning open banking are not limited to the financial sector. Similar requirements are set to be rolled out to utility companies and healthcare providers.

This will make it far easier for consumers to switch between, for example, electricity and gas companies. Instead of having to fill out protracted application forms and provide personal details multiple times, this data can be shared between the consumer’s current provider and the one to which they are switching.

There are also significant opportunities to make use of open-banking techniques in the healthcare sector. If doctors and care providers are able to securely access a patient’s records from a number of different sources, a complete and accurate picture of their medical history can be generated much more quickly.

Unfortunately, trust is lacking in many people’s minds as is evidenced by the slow take up of Australia’s My Health Record system. However, as more people come to understand the benefits that such access can deliver, adoption rates are likely to climb.

The principles underpinning API-powered open banking are going to reshape many aspects of modern life. The result will be better choices, more flexibility, and greater competition.