Open banking

Article

Open banking

A seismic shift

Open banking is a seismic shift in retail banking driven by regulatory changes, changing consumer preferences, and technology-enabled innovation. The evolution from a closed model, where each financial institution retained and controlled the information it collected about its customers, to an open model, has the potential to change competition in the sector and see the creation of new products and services based on that data.

The Australian government has been moving towards implementation of the operating model and regulatory framework for open banking in Australia based on the recommendations in Australia in February 2018 (the Farrell Review).

For immediate focus

The Australian Competition and Consumer Commission (ACCC) will determine the sectors that will be subject to the Consumer Data Right (CDR) and will develop rules regarding its use and the required data standards. The Australian Information Commissioner will examine the privacy impacts, while the CSIRO will be the data standards setter.

As open banking enables personal information to be shared between organisations, data privacy, data security and consents will become critical.

Banks will need to ensure that they have an effective application programing interface (API) to connect with a banking ecosystem and enable data sharing, and the data governance and architecture which is robust enough to meet the data sharing obligations.

The ability to effectively use customer data will be paramount. Banks will invest in analytics and artificial intelligence and related capabilities to add value to consumers.

There will be opportunities to adopt strategic pricing, including risk-based pricing, as financial institutions more accurately model risk. However they will also need to thoughtfully consider the way in which pricing will take into account considerations around conduct and fairness.

The growth of third parties in the provision of financial services is likely to impact financial crime risk management and reporting.

Critical dates

Ongoing – Data61 consults on the open banking data standards.

13 February 2019 – The Treasury Laws Amendment (Consumer Data Right) 2019 Bill was introduced into the Australian Parliament.

28 March 2019 – The Senate Standing Committee provided comments on the Consumer Data Right Bill.

11 April 2019 – The Consumer Data Right Bill lapsed at dissolution of the Australian Parliament.

Subject to the passage of the bill in the new Parliament:

1 July 2019 – All major banks will be required to provide access to product data for credit and debit cards, deposit accounts and transaction accounts (Phase 1 products).

No later than 1 February 2020 - All major banks will be required to provide customers with access to consumer, account and transaction data for credit and debit cards, deposit accounts, and transaction accounts (Phase 1 products).

1 February 2020 - All major banks will be required to provide access to consumer, account and transaction data and product data for mortgage accounts (Phase 2 products).

1 July 2020 – All major banks will need to provide access to consumer, account and transaction data and product data for Phase 3 products, including overdrafts, personal loans, business finance, leases, asset finance; all other banks (and accredited data recipients) will need to provide access to consumer, account and transaction data and product data for Phase 1 products.

1 February 2020 - All other banks (and accredited data recipients) will need to provide access to consumer, account and transaction data and product data for Phase 2 products.

1 July 2021 – All other banks (and accredited data recipients) will need to provide access to consumer, account and transaction data and product data for Phase 3 products.

Explore our open banking series below to help you prepare for the changes:

Open Banking: Where to now for the Consumer Data Right?

The re-election of a Coalition government means that organisations should remain focussed on their Open Banking change program, as this continues to have the potential to be one of the most important changes in financial services in a generation.

Open Banking: Competitive edge through data architecture

Data governance and architecture is a tightrope that organisations in the banking sector must navigate to realise the upside of unlocking information silos, and to protect themselves from potential threats in an open banking environment.

Open Banking: What does it mean for analytics and AI?

Artificial intelligence is already driving a dramatic shift in how financial institutions attract and retain customers. In an environment where customers are able to share their data, the ability to aggregate, manage and analyse data will become increasingly important.

Open Banking: Privacy at the epicentre

By giving customers control over their banking data, and the ability to share it with third parties, open banking will transform banking in Australia. It has also generated a renewed focus on privacy. Open banking will result in more entities accessing banking data, and banking data being transferred more often – increasing the possibility that data privacy is compromised.

Open Banking: What does it mean for financial crime?

The evolution of an open banking model, where customers rather than each financial institution control and share their data, will potentially have a profound effect on financial crime risk management.

Open Banking: Why APIs matter

For years, discussions around APIs were confined to the developer community, but today they are the stuff of backyard BBQs, millennial games nights as well as blue chip boardrooms. The imminent arrival of open banking and the spread of data-sharing continue to amplify the importance of the ‘API Economy’.

Open Banking: Conduct: it’s everyone’s responsibility

Open Banking is an ‘opportunity to re-shape how banks will deliver value in their financial products’. It promises substantial benefits in competition, innovation and productivity. Organisations need to prepare to address potential conduct considerations of fairness, transparency, vulnerability and suitability.

Open Banking: Potential pricing implications

Information about a customer’s financial position and transactions has been a key source of competitive advantage for established financial institutions. The move to open banking will result in the ownership of this customer information moving from financial institutions to customers, enabling them to share their transaction and other data with third parties.

Open Banking: Comprehensive Credit Reporting (CCR) (updated July 2018)

The end of September 2018 will see the four major banks provide the first component of Comprehensive Credit Reporting (CCR), effectively a component of Australia’s emerging open banking regime. CCR, otherwise known as ‘positive reporting’, enhances the credit information provided by lenders and credit reporting bodies. This has the potential to enhance differentiation of customers based on risk.

Open Banking: A seismic shift

Open banking is ‘one of the biggest changes in financial services in a generation’, according to American Banker magazine. The changes enabled by open banking and comprehensive credit reporting will have a significant impact for customers, data privacy and financial crime, strategy and pricing, conduct and fairness, artificial intelligence, and application programming interfaces (APIs). Financial institutions that fail to align their actions in all of these areas ‘risk getting left in the dust.’

Read more insights from our Deloitte experts:

Deloitte has a range of services to help organisations get up and running with open banking. We can assist organisation’s assess the impact of comprehensive credit reporting and evaluate strategic pricing options. We help them navigate the challenges of conduct, privacy and financial crime compliance. We help them develop their data strategy and amplify their actions on artificial intelligence, analytics, automation and algorithms. And as organisations prepare for the exploding API economy we can help them develop the vision for an organisation’s open banking strategy, the development of propositions based on customer research and testing, integration and developing of API platform scaffolding including platform and security architecture, and design and build of APIs to support open banking delivery.

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