On Tuesday, May 11th the Treasurer, the Hon Josh Frydenberg MP, declared ‘Australia is coming back.'
This year’s Federal Budget, which focused on Australia’s economic recovery from the COVID-19 pandemic, included a $1.2 billion technology package centered around digital skills and cyber security. While it was relatively quiet for the FinTech sector, the announcement of a $113 million investment into the rollout of the Consumer Data Right (CDR), the legislation behind open banking, has the power to spearhead growth in the finance sector and increase Australians’ financial wellness.
The Australian Government announced the introduction of a CDR in 2017. The CDR, which Envestnet | Yodlee recently became an accredited member of, set out to give consumers greater access to, and control over their data, improve their ability to compare and switch between products and services, and encourage competition between service providers. This has evolved over time. The CDR was originally limited to the sharing of data for deposit and transaction accounts, and credit and debit cards – however the sharing of data relating to home loans, personal loans and joint accounts commenced from November last year.
Open banking, which the CDR is centered around, involves organisations sharing their banking consumer-permissioned data with accredited third parties via APIs. This process provides consistent access to user data with reduced security risks for all parties involved, ultimately benefiting both consumers and service providers.
As such, open banking could completely revolutionise the future of finance and how consumers engage with banks and financial service providers. It can help Australian consumers and small businesses make more informed decisions about their finances and give FinTechs and finance companies the ability to innovate faster with the use of accurate, user-permissioned financial data.
On the right track
There is, however, a long way to go until the use of open banking is ubiquitous – and investment into its deployment is of paramount importance. As such, it’s encouraging to see the government committing funding into its further expansion. The further its rollout progresses, and the more financial organisations and Australian consumers have access to its benefits, the stronger the future looks.