Why Open Banking had a slow start

“It is extremely significant. It’s as big as NBN or as big as mobile number portability, it’s a huge undertaking and it needs planning,” he says.

“Unfortunately, the downside of introducing something like this is that it takes time and it takes time for organizations to use it, it takes time for consumers to even notice and they are not aware of it. ”

Mathew Tyrrell, APAC commercial director at fintech Codat, believes the adoption of open banking has landed “more with a whimper than a bang”. He worries that last year’s cyberattacks on Optus and Medibank will further slow the adoption of open banking.

“With the recent security breaches at Optus and Medibank, data security is a top priority for all Australians, making them more cautious than ever about who they share their data with,” he says. “Unfortunately, that reluctance now threatens to slow down the benefits we can unlock as a nation with open banking.”

Why is Open Banking so slow to take off?

Finance Services Secretary Stephen Jones strongly supports the consumer data rights regime and the government’s move to extend the regime to other sectors, including energy. But he agrees that customer adoption has been slow.

“I think the idea of ​​expanding it beyond the banking sector to other areas of the economy is also absolutely the right political direction, but I think the uptake and delivery of new products and services has been very slow,” Jones says in an interview .

According to Jones, the reasons for the slow progress are the labor shortage in the technology sector and the fact that the rollout took place during the hectic period of the COVID-19 pandemic.

Fintechs, meanwhile, point to complex regulations and differences in the implementation of the regime in Australia compared to the UK.

The CEO of UK fintech Revolut’s Australian arm, Matt Baxby, says open banking can ultimately offer consumers a more “seamless” experience, including the ability to see all of their accounts in one place and apply for loans more easily.

“We are very positive about the possibilities that open banking offers,” he says. “We’re finding ways to put customers in control of their money and many of the benefits we’ve seen in our UK experience will eventually make their way to the Australian market.”

However, Baxby says the main difference between Australia and UK open banking is something called “payment initiation”. Essentially, UK customers can allow a third party not only to receive data, but also to take “actions” on their behalf, such as: B. opening or closing an account. Experts say this has resulted in the UK system having more use cases for customers and therefore has led to more switching.

“I think that was probably one of the main reasons why adoption in Australia was maybe a bit slower than in the UK,” says Baxby.

The government is trying to address this: Jones says it introduced legislation late last year to allow “initiation of action”.

“It’s a game changer,” says Jones.

“It’s one thing to be able to say to your bank: I want you to share my customer details with this bank I’m going to.”

“It’s another thing to be able to say to a service provider: I want you to pay all these bills, through all these different banks that I have, on these terms and on these dates. Or: I want you to continuously monitor my electricity service and I want you to receive quarterly or semi-annually the best deals on the market and switch my accounts accordingly.”

When such products actually come to market depends on the industry, but according to Jones, fintechs tell him they’re excited.

Fintechs share Jones’ optimism that consumer data rights could still make big changes, but say it’s likely to be a slow journey.

Digital mortgages – facilitated by open banking – are a case in point. While some believe that digital home loans could be a major disruptive force, initially they will only be available for simpler loans and will likely take a small share of the overall market.

According to Daniel Oertli, chief executive of Unloan, CBA’s digital mortgage division, the bank hopes to launch Open Banking-enabled applications in early 2023. “You make your application, there’s about 30 seconds of processing time and then there’s a decision. Either the decision is approved immediately or we escalate it to a team member.”

Oertli says no paper is required for easy application. Borrowers who are self-employed or have investment income may still need manual assessments. Will it encourage switching? Örtli thinks so.

“One of the main reasons customers don’t switch when they have access to a better deal is because they don’t want to go through the process,” he says.

Basiq CEO Damir Cuca is also optimistic about the long-term potential of open banking, arguing Australia has made “remarkable” progress in this area. “What we have to recognize is that this is a very ambitious and new infrastructure that we are building within the Australian economy,” says Cuca.

Thrassis believes that eventually, open banking will result in customers switching more, and that switching mortgages could eventually become more like switching cell phone providers. However, it will take some time.

“I see that this is the beginning. It may take five years, it may take ten years, but it will happen once you have the framework and ecosystem in place.”

https://www.smh.com.au/business/banking-and-finance/a-whimper-rather-than-a-bang-why-open-banking-has-had-a-slow-start-20221206-p5c42z.html?ref=rss&utm_medium=rss&utm_source=rss_business Why Open Banking had a slow start

Brian Lowry

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