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Australia is racing towards a high quality open banking future, says Gareth Gumbley, CEO and founder of leading open banking provider Frollo.
Image source: Gareth Gumbley / Frollo.
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Australia is taking a unique path in its journey towards widespread global adoption of open banking.
The main difference between open banking in Australia and, say, the UK is the top-down, policy-led approach of the local government through consumer data law (CDR).
In essence, the CDR gave Australians the right to access not only all of their financial data, but also their utilities, telecommunications and more, in multiple phases over the coming years.
This groundwork encompasses a wide range of financial products, from mortgages and personal loans to credit cards and business accounts.
And after a slow start, momentum seems to be growing as Open Banking celebrates its second birthday.
Two of the country’s largest banks, Commonwealth Bank of Australia and Australia and New Zealand Banking Group (ANZ) are expected to launch their first open banking use cases later this year.
Australia’s ultimate goal is clearly much more ambitious than what open banking is currently in Europe – where policymakers are still wrestling over the first step in extending banking information to other financial products.
But this great ambition brings with it more complexity.
Australia’s state of play
“We have a government that really plays a long game in terms of the perks they seek,” said Gareth Gumbley, CEO and founder of Frollo.
“And that’s why we have a much richer and deeper data set to work with.”
Frollo is the Australian equivalent of an Account Information Service Provider (AISP), which makes it easier for fintechs and banks like ANZ to access open banking information and then use it to create products or services.
According to Gumbley, the traffic jam is the lack of accredited data recipients, i.e. those who can receive the data that the big banks divulge.
Accreditation is currently a somewhat tedious process; In the almost 12 months since the first phase of Open Banking began, only 12 institutions have made it. However, Frollo and others are advocating changes to the CDR to introduce tiered accreditation and reduce complexity.
Plus, the longtails of smaller Australian banks, around 90+ institutions known as data owners, have until July to roll out their APIs, another major boost for data recipients.
The counterbalance to complexity is the enormous opportunity for connected financial products that use a far greater amount of financial data than is available in Europe.
As Gumbley puts it, using Open Banking will result in Australia having a higher consumer dollar value than the UK, although the scope of Open Banking may lag behind the UK’s 3 million users.
The first place the higher value of Open Banking is likely to show is in the vast Australian real estate market, which currently supports around A $ 1.78 trillion worth of mortgages.
“We are a country with huge debts and we have a lot of mortgages,” says Gumbley.
“So the greatest opportunity for us is to bring competition to the Australian mortgage market. If we can do that, it will be a really strong position. “
Frollo could even find itself at the forefront of such an open, bank-powered mortgage process, given its acquisition by NextGen.Net in 2020, a leading technology provider to Australian mortgage brokers and banks.
In fact, Gumbley suspects that the first open bank-backed mortgage processes could be launched later this year.
“The winning situation is that consumers are not aware of open banking; what they become aware of is a much better experience, ”he says, adding that the winner will be the one who manages to make open banking“ invisible ”.
“I don’t want a new mortgage. I want a house. It’s about how quickly I can get the keys to the house I want to own. And if we can reduce the points of contact between lending and credit, we end up with a high-quality experience. “
And the loan or the mortgage itself is only the first step; the real opportunity, says Gumbley, is in mortgage monitoring.
Australian banks are required to provide APIs for all of their financial products, including mortgages. That means that in the future, an integrated broker could monitor whether a client’s mortgage is still delivering good value months or even years later.
The future has never been closer
Like many industries in the midst of technological change, banks (or “data holders” as they are called in Australian open banking parlance) were initially resistant to change.
“When I spoke to bank CEOs and board members about Open Banking over a year ago, it was a strong defensive and protective mentality – there was a great fear of being and giving up control of that data.” Frollo CEO explained.
“What we are seeing today is a much faster transition from ‘I have to defend myself’ to ‘what a great opportunity to compete’.”
As understanding and acceptance of the industry grows, Frollo and others experience this shift in mindset firsthand.
“I don’t think there will be a board of directors in 12 months that doesn’t ask the CEO what we’re doing in open banking?”
And looking ahead, the potential to leverage Australian open banking to take financial services and products to the next level is temptingly close.
“In the future, we will be moving towards a much more transparent system in which credit products or building loans are as clear and easy to understand as a savings account is today.”
“I’m really excited and probably too animated,” laughs Gumbley.
“I always want to be Oliver in the future. I never want to be here now. It’s all going too slowly for me! “
Fortunately for Gumbley in Australia, the future of open banking is now closer than ever.
This article was provided by Frollo and does not necessarily reflect the views of AltFi.
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