From 1 November, more consumer data sharing will open up exciting possibilities in lending.
Brenton Charnley, CEO – TrueLayer Australia & New Zealand
31 Oct 2021
Phase 2 of Australian open banking is finally here for everyone!Australia's open banking regime is hitting yet another milestone this year as the second phase of the rollout launched on 1 November for all non-major banks. What that means is a range of new financial products have been added to the line up of product reference data that Australians can share through open banking.Open banking’s promises of choice, convenience and confidence are slowly but surely emerging. The first phase of the open banking rollout saw the inclusion of: savings, call and current accounts, term deposits, cheque accounts, debit card accounts, transaction accounts, GST or tax accounts, personal credit or charge card accounts, and business credit or charge card accounts. This second phase adds residential home loans, investment property loans, mortgage offset accounts and personal loans to the list.Earlier this year we wrote how open banking will turbo-charge lending in Australia because lending will be one of the first use cases to drive adoption of open banking under Australia’s ground-breaking Consumer Data Right (CDR), the framework that governs the open banking ecosystem in Australia. With the addition of loan accounts to supplement transactional accounts, it will be much faster for consumers to apply for a new personal loan or refinance an existing home loan. They can share their income and expenditure information from their day-to-day bank account and now they can also share their loan data. A lender will be able to use open banking to see the loan history and verify the amount outstanding in compliance with Australia’s responsible lending laws. The next key milestone to look for is Phase 3, which launches on 1 February 2022, and wraps in personal and business overdrafts, business finance, investment loans, personal and business lines of credit, asset finance, cash management accounts, farm management accounts, pensioner deeming accounts, retirement savings accounts, trust accounts, foreign currency accounts and consumer leases.More information about the phased rollout is available on the CDR website.
More products = more consumer engagement
The key to a successful open banking regime is consumer engagement. So the more banks and fintechs participating, the more opportunities their customers have to use it and the more confidence consumers will have in the system itself. TrueLayer has more than five years of experience in the UK and Europe, and that track record tells us we can be positive about the momentum behind Australian open banking now that we've reached the second phase of the rollout for everyone.In the UK, it took 24 months from launch to get to 1 million active users of open banking, according to Open Banking UK. It took eight months for the next million, just over six months to hit 3 million and less than 6 months to hit 4 million.That momentum came from a virtuous circle: as more people got used to open banking and used it more often, more opportunities were created, giving consumers more choice.
Picking up pace
In Australia, we're still in the early stages of creating those initial opportunities for consumers to use open banking but we're picking up pace.All Data Holders (banks and other Authorised Depository Institutions (ADIs)) were supposed to be CDR compliant by 1 July this year, and make API endpoints available so consumers can safely and efficiently share their financial data to get better deals in the market.Many banks still have exemptions – some well into 2022 – to give them extra time to comply. The good news is that as of the end of October almost 50 ADIs are now active Data Holders under the CDR.Complementing these ADIs are 20 Accredited Data Recipients (ADRs). These are organisations like TrueLayer which are allowed to access, with consumers' permission, data held by Data Holders. Becoming an ADR offers the most flexibility within the open banking ecosystem and if you think this is the right access model for you, read our guide on how to become an ADR and contact us to find out how we can help.Thanks to the inclusion of a range of ways to access open banking in Australia, the number of businesses able to access the ecosystem will be far larger in the coming months. Open banking is definitely picking up pace. It’s important to choose the right way to access CDR data for your business. For example, as an alternative to becoming an unrestricted ADR, you can become a CDR Representative of TrueLayer and still access full CDR data. To find out more about this access model, read our guide here. The foundations for open banking in Australia have been laid and now it's time for builders like TrueLayer, and our partners, to create the kind of ecosystem that will give consumers the choice, convenience and confidence they need to make the move to a new way of doing finance.
