Australia’s open banking revolution begins

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The report published by Frollo and NextGen.Net shows a huge appetite for CDR. 71 percent of respondents plan to use CDR but cite major challenges.

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The leading Australian open banking provider Frollo and the leading technology provider in the credit industry, NextGen.Net, have published the first industry report on the state of open banking in Australia since the launch of the Consumer Data Right (CDR) on July 1, 2020.

The report on the State of Open Banking in Australia takes a look at what the financial sector thinks about the new banking regime, its direction and the most immediate challenges and opportunities for businesses.

The report, based on interviews with key industry leaders and a survey of 161 finance and brokerage professionals in the Australian financial sector, shows that there is still much to be done before the new open banking ecosystem fulfills its promise to be a game. For the industry, there’s a keen appetite for investing in CDR and a host of popular use cases that could revolutionize the way Australians manage their finances. 71 percent of industry respondents intend to use CDR data and nearly 58 percent say they intend to use CDR data within the next 12 months.

In terms of use cases, streamlining the lending process by reviewing income and expenses has been identified as the most popular immediate use case for open banking. 56 percent of respondents rated it as valuable, followed by onboarding automation (52 percent) and account verification (52 percent) 41 percent) as the next most popular.

Garoll Gumbley, CEO and founder of Frollo, said while the rollout was on the right track, the investigation found that the biggest challenge facing companies was not being clear about what it takes to stand up in terms of costs and ROI to participate in the CDR.

“The majority of respondents believe that uncertainty about the rules and customer training are seen as the main challenges to CDR’s success. We know that changes on this scale are not at the push of a button, but there is currently too much confusion. The rules are not clear and for many it is viewed as a mountain too big to climb. There is a difference between consulting and collaboration. Now is the time for the regulator to invest in a simpler and more flexible framework to accelerate adoption, or empower banks and fintechs to innovate and move on for the benefit of everyone else who will follow, ”said Gumbley.

The report found that while interest in investing is high, commitment to investing varies among those willing to disclose their planned budgets. 64 percent of banks and 54.6 percent of technology providers say they will spend more than $ 500,000. and 54.2 percent of fintechs expect to spend between $ 100,000 and $ 500,000 on open banking in the next 12 months.

For those looking to invest, improving the customer experience is the main driver of investing in open banking for 64 percent of respondents. Product innovations (56 percent), meeting changing customer requirements (40 percent) and optimizing processes (40 percent) are the next most popular reasons, closely followed by compliance management (39 percent).

Tony Carn, chief customer officer at NextGen.Net, said the rollout of open banking was a pivotal event for the Australian mortgage industry and the impact of CDR would be a matter of survival for the strongest in the industry.

“The ability to streamline credit decisions through the use of CDR data to reduce unnecessary friction in the application process and speed up the decision-making process is of vital importance to the industry. Use cases like checking income, expenses and liabilities also help reduce costs and risks on the lender side, making it a logical and popular use case with banks, lenders, fintechs, and brokers and aggregators. It also offers a new way in which customers can be won and nurtured throughout their lifecycle. It’s not just the one moment in time (like getting a home loan), it’s also the ability to make customers “financially viable” before and after, ”Carn said.

Industry leaders agree that first movers have a real competitive advantage and by delivering a superior user experience they are putting pressure on the rest of the industry to invest in catching up. However, most respondents believe that it will take between 3 and 5 years for the majority of Australians to use open banking.

In particular, the lack of clear rules and certainty about the future scope for “write access” and “tiered accreditation” currently being consulted for phase 3 implementation has slowed the uptake of accredited data recipients (ADRs) to date – and most industry commentators believe that these two factors will be the key to innovation opportunity for most companies in the industry.

Download a copy of the Australian Open Banking Status Report here.

Hear from Frollo CEO and Founder Gareth Gumbley to bring you an update on Open Banking at the AltFi Australasia Summit on Wednesday April 28th at 5 p.m. AEST / 8 a.m. UK time.

This article was provided by Frollo and does not necessarily reflect the views of AltFi.

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