What is open banking?

Open banking is the ability for people to share their financial data and banking information securely with the organisations they choose to. This can make payments faster and easier, give advisers a more complete view of a person’s financial position, facilitate instant loan approvals and credit scoring, and even help with real-time fraud detection.

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Australia and New Zealand might be looking to UK's experience as they continue their journeys in open banking, but the real global surprise has been in Brazil. With a population of 200 million, the country boasts an open banking ecosystem with 27 million customers and 41 million participating accounts.

More than 800 institutions participate in the Brazilian open finance ecosystem and it is estimated that penetration will reach around 70% of consumers by the end of the decade.

In the UK, which began its move to open banking in 2017, the latest figures reveal that 13% of digitally active consumers and 18% of small businesses are using open banking services.

While these numbers are not impressive when compared with Brazil, they are certainly well ahead of Australasia, where New Zealand is just embarking on its journey and open banking is struggling for traction in Australia.

A review by the Australian Banking Association (ABA) released earlier this year revealed that the Consumer Data Right (CDR) regime, implemented to support open banking, has very little traction with customers three years after coming into effect.

The ABA found that only 0.31% of bank customers were using the CDR regime at the end of 2023, while even more concerning was the fact that more than 50% of data sharing arrangements had been discontinued or allowed to lapse.

Anna Bligh, former Queensland premier and CEO of the ABA, said it was “time to go back to the drawing board” when it came to open banking in Australia, which needed a “new pathway forward.”

“Despite the best efforts of government, regulators and industry, this review makes it clear that CDR has not realised its potential,” says Bligh.

She says the CDR is imposing disproportionately higher compliance costs compared with bigger traditional banks, leading to a lower priority on open banking projects.

“Despite the best efforts of government, regulators and industry, this review makes it clear that CDR [Consumer Data Right] has not realised its potential.”

Are fintech companies leveraging the open banking regime?

One of the major hopes for open banking was that it would help usher in a new wave of innovation led by fintech companies leveraging the regime. It has drawn some startups, but the ABA points out that the growth in mobile wallets and PayID has been significantly higher.

A May 2024 report from FinTech Australia pointed to 175 open banking offerings live in Australia, while some stakeholders on the non-banking side claim that the big banks – whose support is crucial – are actually lukewarm in their enthusiasm.

While the CDR went live to customers of the big banks in mid-2020 and was rolled out through other banks in July 2021, the regime is still incomplete. Expansion to non-bank lenders is only being considered for this year, with the aim to be operational by mid-2026.

Although action initiation was passed in August 2024, the government has indicated that it will not rush new action types, such as customer bank switching, until the CDR regime is back on track.

A report from data aggregator Basiq has delivered a different perspective, claiming that open banking is showing steady growth.

Basiq operates a data platform and says that between October 2022 and March 2024 it experienced a compound growth rate of 30%, with connections rising to just under 800,000.

In the year to July 2024, Basiq says almost 50% of new connections on its platform were through open banking.

The open banking cause received a boost in September 2024, when 15,000 ANZ customers linked accounts they held at other banks to their ANZ Plus profiles, aggregating all their banking interactions in the ANZ app.

The government, for its part, is aware of the slow uptake – with Assistant Treasurer and Minister for Financial Services Stephen Jones saying the Treasury unit developing data standards has been told to focus on high-value use cases such as home loan applications, small business accounting, and switching energy providers.

Does the regime hinder accountants' access to customer data?

CA ANZ has long had concerns about how Australia’s current regime, and potentially New Zealand's, hinders the profession’s access to customer data through the CDR, acting as a brake on efficiency and innovation.

Jill Muir, CA ANZ’s senior policy advocate in business reform, says accountants are trusted advisers, but this is not recognised appropriately in the Australian regime, which puts them outside the loop for frictionless data sharing.

To be recognised as a trusted adviser in the Australian CDR regime, an accountant must enter a commercial arrangement with an accredited data recipient (ADR), such as an accounting software platform.

This reflects the view that ADRs carry the liability for the security of the CDR data being disclosed to a trusted adviser, even though data disclosed to a trusted adviser is no longer considered CDR data.

Fixing this would bring more customers into the CDR regime through their trusted advisers, enabling accountants to widen and deepen the services offered to clients.

“In essence, digitisation reduces workloads,” she says.

“If you can access those key transactions instantly, you are not spending time reconciling and matching up, and those efficiencies will lead to greater innovation in the accounting industry.”

This is one of the issues under consideration in New Zealand, where although the government has introduced the Customer and Product Data Bill into parliament, much of the detail is expected to be contained in a regulatory framework to follow.

Open banking: industry led

One of the differences in New Zealand is that, to date, open banking has been purely industry led.

In May 2024, the country’s four largest banks: ANZ, ASB, BNZ and Westpac, made the payments initiation standard developed through industry consultation by the API Centre available to third parties. Kiwibank will follow by 2026.

“One of the big differences between Australia and New Zealand is that payments initiation is a big focus and we have been driven by the payments industry,” says Phil Cass CA, who manages the API Centre which is a business unit of Payments NZ. “We are starting to build and we are starting to see some of the new payments providers in the market, but it’s really early days.”

These early initiatives have been based around easier and safer payments, personal finance, budgeting and financial education.

A milestone event in November 2024 was when the four banks covered by the May deadline began sharing data through the account information standard with third parties who are able to partner with them. The Commerce Commission has granted an authorisation to the API Centre to enable it to develop and roll out an accreditation regime, which will streamline the way in which third parties will partner with banks. 

The API Centre has been meeting with working groups almost every week for about five years, alternating between business and technical issues, and Cass says he believes that although New Zealand has taken its time, the idea of open banking has wide engagement and support.

Banks have a timetable to deliver new versions of account information and payments initiation standards during 2025.

“All this has been designed by industry for industry, and not just the banks,” he says. “It’s also about third parties, so we’ve been consulting widely.”

The API Centre has also been working with screen scraping organisations which have been building functions around basic and unregulated data sharing, but who “very clearly want a new way of sharing data and making payments,” says Cass.

He hopes that, ultimately, the standards which he and others have worked on and endorsed will merge seamlessly with regulation created through the parliamentary process, and regulation will support the current momentum and not hinder it.

“My hope is that open banking will create inclusion and bring in those people who are underserved by banking,” he says. “When we embrace the wider data economy that is when I think we will see the really big wins.”

“With the right consent, you can share not only your banking data but medical, utility, educational data and more, and I think all those things will come together.”

Success will not necessarily be measured by the number of fintech startups, Cass adds. It will come when someone on a limited income who lives in an isolated area and who has to take their child into a city several times a week for medical support will be able to share data with a welfare agency who will be able to help them.

“They might be making a choice between putting petrol in the car or food on the table, but through sharing their data they can explain their case in real time,” he says. “Then someone can assess the case, press some buttons and immediately put NZ$200 in their account, so they can put dinner on the table for their children.”

“That’s a big leap from where we are now, but that is ultimately where all of this is leading to.”

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Open banking case study: BillWill

 

When Colin Jowell’s father passed away in 2020, he left detailed instructions on his financial affairs, with the exception of one direct debit for a service he rarely used.

“It took us nine months to shut it,” says Jowell. “That was nine months of backwards and forwards, of trying to recoup information because it was a service that he hadn’t used for many years and our enquiries were always met with ‘we need to speak with the account holder.’”

From that unpleasant frustration came a business idea. What if there was a way to avoid that experience, and make it seamless – and also stress free – to close down a person’s financial affairs once they die?

Jowell had previous experience working in open banking in Australia and combined his personal experience with his professional knowledge to create BillWill, which claims to be the world’s first open banking solution for pre-death bill planning.

Using open banking, a person planning their estate can nominate someone as their legacy contact.

When the person passes away or becomes incapacitated, the legacy contact sends a notification to BillWill informing them. They then have the access and power to manage the person’s payments and bills, working with the executor or relevant power of attorney as required.

Through the Consumer Data Right, people are able to use their banking data to simplify their legacy contact’s job as an effective ‘digital executor’ in the event of their death or incapacity.

Jowell says that executors and next of kin can be burdened with 50 hours or more in administrative time as they track down a deceased person’s bills, engage with corporates, prove their identity and their authority to act.

“In one case, a father provided phones for all his kids,” says Jowell. “When they grew up they took over their phone bills, but while the bills were in their name, unbeknownst to them their father was still the account holder.”

“The son ordered a new phone but he couldn’t get it out of the post office because it was addressed to his dead father. It probably took him 40 hours to resolve the problem.”

BillWill, which is being distributed through financial planners and accountants, sees the sharing of data and the granting of access through open banking as the solution not just to saving time for grieving family members, but also reducing stress at a difficult time.

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What is the CDR process in Australia?

The Consumer Data Right (CDR) is an opt-in service that allows you to decide if and when to share your data, with complete transparency about who will receive it and why. While the data is exchanged directly between providers, the system is designed and monitored by the Australian Government to ensure security and protect consumers. Only providers that pass a strict accreditation process, overseen by the Australian Competition and Consumer Commission (ACCC), are authorised to offer CDR services.

How to be recognised as a trusted adviser of a client in the Australian CDR regime?

To be recognised as a trusted adviser of a client in the Australian CDR regime, an accountant would need to enter a commercial arrangement with an accredited data recipient (ADR), such as an accounting software platform. ADRs are the party that can receive the machine-readable data, CDR data, from data holders such as banks.

ADRs carry the liability for the security of the CDR data being disclosed to a trusted adviser, even though data disclosed to a trusted adviser is no longer considered CDR data.

Fixing this would bring more customers into the CDR regime through their trusted advisers. Being able to access a client’s data in real-time will enable accountants to widen and deepen the services they can offer to their clients.

“In essence, digitisation reduces workloads,” says Muir.

“If you can access those key transactions instantly, you are not spending time reconciling and matching up, and those efficiencies will lead to greater innovation in the accounting industry.”

CA ANZ continues to advocate for a more inclusive CDR regime that recognises the trusted adviser status of accountants, ensuring they have the necessary access to financial data to support their clients effectively.