The Open Banking Timeline in Australia

Open Banking is giving Australian consumers greater ownership over their financial data than ever offered before, shifting the industry into a modern competitive market. This free opt-in service gives you the control to share your personal and financial data, allowing you to make better financial choices for your financial future.

The guide below will help you understand what Open Banking is, how it can be used and its benefits to consumers as well as how it affects and changes the Australian financial industry as a whole.

Open Banking benefits anyone with a bank account. It is a big step forward for Australian consumers who want greater control over how they save, seek and spend their money. Where in the past your banking data was between you and your bank only, Open Banking provides an opportunity for consumers to request who and what data they want shared with other banks, financial organisations and accredited companies when they choose. Through ease of sharing data, greater transparency and choice in a wider financial environment, the power is being transferred to the consumer to make better decisions for their financial life now and in the future.

Given the current state of the world, rising inflation and housing prices going up faster than wages are increasing in Australia, being in control of your financial future is crucial. Open Banking is driven by technological innovations, changing consumer preferences and new consumer data laws.

Traditionally, your bank was the sole custodian of your financial data. In this closed looped-system, reluctance to share data with other banks or financial institutions made extracting data difficult and cumbersome for the consumer. As open is the opposite of closed, the major benefit of Open Banking is the ability to make public, at your discretion, data that is personal to you into a competitive financial market for your own benefit. Shopping around for the best choice of bank account, home loan or credit card becomes easier and simpler, as you have control over the data that is required as previous restraints have been eliminated.

Open Banking benefits anyone with a bank account. It is for anyone looking to save, spend or is seeking a loan for money, benefiting the consumer with:

Added value for the consumer’s financial wellbeing

Open Banking is a free service that gives consumers an opportunity to opt-in to greater choice when applying for new financial products and services, especially when it comes to securely sharing your data with accredited smaller enterprises and third party FinTech’s that offer apps for investing and managing your money (the later which rely heavily on daily data for richer insights).

Full and fast data sharing

Sharing your full historical banking data with another service provider can be done in a few clicks, as opposed to seeking out all the required data manually from one financial system to be input into another. This means that obtaining a loan or switching banks becomes faster and easier.

Consumer protected

Open Banking gives data at your request only to accredited financial institutions and third-party businesses only. You are in control of who you want your data shared with securely on your behalf and only on your confirmation. At any time, the consumer can withdraw their consent for data sharing and their data must legally be removed.

Creates a more competitive environment

Banks and other financial enterprises will be pushed further to innovate and create new products and services that compete harder for your business, for example with initiatives such as personalised rates or simplified management of multiple financial providers in one place.

Open Banking was made possible through the Consumer Data Right (CDR) legislation. The major four banks in Australia: Commonwealth Bank, National Australia Bank, ANZ and Westpac, have been mandated to give their consumers control over their financial data since July 2020. This data is provided through the use of Application Programming Interfaces (API’s). APIs allow you to share your banking data with third party services, all which have been accredited by the Australian Competition and Consumer Commission (ACCC). Many other major financial institutions operate under the Open Banking framework, with other small to medium sized banks expected to implement this in the future.

Accredited financial institutions or businesses are identified by the CDR logo or by checking the CDR database. The process for a consumer to enable Open Banking data sharing is secure and stringent given the availability of sensitive data. Although, it takes a minimal amount of time and follows the four steps outlined below that must be completed in the CDR website, third party website or application of choice.

• Consumer consent for a provider to gain access to your financial data
• Identification verification
• Data sharing selection, in detail to ensure control over the level of access
• Confirmation of data transfer, completed through APIs to selected enterprise

In August 2019, Consumer Data Right (CDR) legislation was passed in Australia, giving consumers, including individuals and small businesses, the right to their own data and who they want to share it with. Currently in its first phase of application in the Australian financial services sector as Open Banking, CDR is expected to be implemented in sectors such as Energy, Utilities and Telecommunications in the future.

The goal of CDR is to empower the consumer’s decision-making abilities as well as improve transparency, innovation and competition between services providers that may ultimately lead to better prices. The ACCC is accountable for accrediting potential secure third-party data recipients and ensuring all stakeholders understand their responsibilities and rights in line with CDR under federal law. ACCC will co-regulate compliance with the Office of the Australian Information Commissioner (OAIC).

CDR’s Open Banking rollout of data availability was implemented in three phases. Leading the way were Australia’s big four banks from July 2020, followed by other banks and Accredited Data Recipients from February 2021.

Phase 1

Data transfer is made available to be shared by consumers for: savings accounts, call accounts, term deposits, current accounts, cheque accounts, debit card accounts, transaction accounts, personal basis accounts, GST or tax accounts, personal credit or charge card accounts and business credit or charge card accounts.

Phase 2

Data transfer is made available to be shared by consumers for: residential home loans, investment property loans, mortgage offset accounts and personal loans.

Phase 3

Data transfer is made available to be shared by consumers for: overdrafts (personal and business), business finance, investment loans, lines of credit (personal and business), asset finance, cash management accounts, farm management accounts, pensioner deeming accounts, retirement savings accounts, trust accounts, foreign currency accounts and consumer leases.

Critical dates from inception to idealisation of Open Banking in Australia are detailed in the timeline below:

May 2017 - The Government announces a CDR commission into data availability.

May 2018 – The Australian Government agrees to implement CDR law, starting initially with Open Banking.

May 2018 ­– Open Banking in Australia announced as 3 Phases of implementation with four major banks approached to make available their data.

July 2019 – Major banks start providing product referencing data for Phase 1 products.

August 2019 – CDR for Open Banking made federal law in Australia.

Feb 2020 – Major big banks start providing product referencing data for Phase 2 products.

May 2020 – Accreditation of data recipients commences.

July 2020 – Open Banking accreditation initiated with the major banks. Major banks also provide further product referencing data on transaction and account data for Phase 1 plus start providing product data referencing for Phase 3 data products. CDR Consumer Privacy Safeguard Guidelines (v2.0) released.

Sep 2020 – Consumer Data Standards (v1.5.1) documentation released.

Oct 2020 ­– deadline for all other banks to provide data referencing for Phase 2 and 3 data products. ACCC CDR Rules come into effect (No.2).

Nov 2020 – deadline for the four big banks to provide transaction and account data for Phase 2 data sharing products. Inquiry into future directions of CDR concludes.

Feb 2021 – deadline for the four big banks to provide transaction and account data for Phase 3 data sharing products.

March 2021 – deadline for Accredited Data Recipients to make account and transaction data available on Phase 1 products.

July 2021 – Other banks Open Banking initiated. Deadline for other banks to provide further product referencing data on transaction and account data for Phase 1. Other banks and Accredited Data Recipients to make account and transaction data available on Phase 2 and 3 products.

Nov 2021 – deadline for other banks to provide further product referencing data on transaction and account data for Phase 2.

Feb 2022 ­– full Open Banking data transfer made available for consumers. Deadline for other banks to provide further account and transaction referencing data for Phase 3.

The overhaul of Australia’s banking and financial data sharing process means that previous restraints are eliminated as the entire system of data sharing is simplified and broadened, changing the way businesses operate and providing benefits from the consumer all the way to the entire economy. Open Banking in Australia joins similar systems that have been rolled out in Europe and the UK since 2018, in creating a more transparent environment within the financial sector.

In the future, consumers will have a lot more options to consider for their financial wellbeing without restrictions from services or bundles provided only by major providers. CDR and Open Banking open up greater possibilities for innovation in financial products and services, specifically where technology is optimised for faster transactions, simplified financial management and personalised options based on data. This is especially promising for start-ups in FinTech and smaller financial service providers as the accelerations of digital payments and currencies have become mainstream, pushed forward by change created due to the Covid-19 pandemic.