Leveraging the Australian Open Banking Opportunity
Australia is heading towards a high-value open banking future, says Gareth Gumbley, CEO and founder of leading open banking provider Frollo.
Image source: Gareth Gumbley / Frollo.
On the road to widespread adoption of open banking globally, Australia is forging its own path.
The main difference between open banking in Australia and, say, the UK is the top-down political approach of local government through the Consumer Data Right (CDR).
Essentially, CDR gave Australians the right to access not only all of their financial data, but also their utilities, telecommunications data and more, in a series of phases over the years to come. .
This foundational work covers a wide range of financial products, from mortgages and personal loans to credit cards and business accounts.
And, after a slow start, momentum appears to be picking up as open banking reaches its second anniversary.
Two of the country’s largest banks, the Commonwealth Bank of Australia and Australia and New Zealand Banking Group (ANZ), are both expected to launch their first open banking use cases later this year.
Australia’s end goal is clearly much more ambitious than where open banking currently stands in Europe, where policymakers are still struggling for the first step in expanding bank data to other financial products.
However, with this great ambition comes more complexity.
The state of play of Australia
“We have a government that is really playing for the long haul, in terms of the benefits it seeks,” said Gareth Gumbley, CEO and founder of Frollo.
“And we have a much richer, deeper data set to work with because of that.”
Frollo is the Australian equivalent of an Account Information Service Provider (AISP), which allows fintechs and banks, like ANZ, to easily access open banking data and then use it to create products or services.
The problem, according to Gumbley, is the lack of accredited data recipients – that is, those who can ingest the data that big banks expose.
Currently, becoming accredited is a somewhat arduous process; Only 12 institutions have managed it in the nearly 12 months since the start of the first phase of open banking. However, Frollo and others are campaigning for amendments to the CDR to introduce multi-level accreditation, thereby reducing complexity.
Additionally, the long tail of small Australian banks, more than 90 institutions known as data holders, have until July to launch their APIs, another big boost for data recipients.
The counterweight to the complexity is the vast opportunity for integrated financial products that tap into a much larger amount of financial data than is available in Europe.
As Gumbley says, Australia will have a higher dollar value to the consumer than the UK through the use of open banking, even though the scale of open banking may lag behind 3 million. UK users.
Mortgages that change the game
The first place where the higher value of the open bank is likely to be demonstrated is the vast Australian real estate market, which currently supports around A $ 1.78 trillion in mortgages.
“We’re a heavily indebted country and we have a lot of mortgages,” Gumbley says.
“So the biggest opportunity for us is to bring competition into the Australian mortgage market. If we can do it, that’s a really powerful position.
Frollo could even find itself at the forefront of such a bank-fueled open mortgage process, given its acquisition in 2020 by NextGen.Net, a leading technology provider for mortgage brokers. and Australian banks.
Indeed, Gumbley suspects that the first bank-based open mortgage processes may even start rolling out later this year.
“The winning situation is that consumers are unaware of open banking; what they realize is a much better experience, ”he said, adding that the winner will be the player who manages to make the open bank“ 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 origination and loan, we end up with valuable experience. “
And the loan or mortgage itself is only the first step; the real opportunity, according to Gumbley, will come from mortgage monitoring.
Australian banks must provide APIs for all financial products they have, including mortgages, which means that in the future an integrated broker could then monitor whether a client’s mortgage is still performing well. worth months or even years later.
The future has never been so near
Like many industries undergoing technological change, banks (or “data holders” as they are called in Australian open banking jargon) were initially resistant to change.
“When I was speaking over a year ago to CEOs and boards of directors of open banking banks, it was really a defense and protection mentality. The CEO of Frollo explains.
“What we are seeing today is a much faster transition from ‘I have to defend’ and ‘what a great opportunity to compete’.”
As understanding and adoption of the industry grows, Frollo and others are witnessing this shift in mindset.
“I don’t think there will be a board of directors in 12 months that won’t ask the CEO, what are we doing in open banking? “
And, in the future, the potential to harness Australian open banking to take financial products and services to the next level is incredibly close.
“In the future, we are moving towards a much more transparent system, where credit products or home loans become as clear and easy to understand as a savings account does today.
“This is really where I’m excited, and probably too excited,” Gumbley laughs.
“I still want to be in the future Oliver. I never want to be here right now. Everything is going too slowly for me!
Fortunately for Gumbley in Australia, the future of open banking is now closer than ever.