8 minute read 28 Mar 2019
Cityscape Sydney city CBD Harbour sunrise

How innovation and security could unlock open banking in Australia

By Mike Booth

Ernst & Young – Australia Banking Technology Leader

Financial services technology advisor. Passionate about Open Banking, platform transformation, data leverage, digital ecosystem, security and financial risk management. Outdoor cinema enthusiast.

8 minute read 28 Mar 2019

Australian consumers are positive but cautious about open banking, requiring regulators to control security and participants to innovate.

This article is part of our Open Banking Opportunity Index.

What has been described as Australia’s open banking “revolution” follows extensive reviews by the Productivity Commission and Treasury. Now, after extensive discussions among many interested parties - government, banks, energy and telecommunication firms, FinTechs and consumer groups - its mandatory rollout is underway, starting with the major banks in 2019.

Australia’s version of open banking is delivered through the Consumer Data Right (CDR). This provides consumers with the right to direct that their data is shared with other organizations they trust, so they can benefit from its value. This will allow consumers to easily switch between financial institutions, compare products and, it is hoped, boost competition, efficiency and innovation in the sector. Australia’s timeframe around its phased implementation of open banking has been deferred but is still ambitious:

  • July 2019:  Australia's major banks will be required to publicly share product data for credit and debit cards, deposit accounts and transaction accounts.
  • February 2020:  Major banks will share credit, debit, deposit, transaction and mortgage account customer and transactional data.
  • There will be a phased pilot for consumers and other participants (other banks, fintechs, etc.) from July 2019.

A complicated regulatory environment may slow rollout

In our Open Banking Opportunity Index, we assessed the readiness of 10 different markets around the globe to thrive in an open banking environment.  Australia ranked fifth overall, and fourth on how supportive its regulatory environment is toward open banking, which came as a surprise to some who expected a higher result.

Austrailia - Open banking opportunity index ranking info graph

While Australia’s regulatory environment is strong, it’s also complicated, with four key bodies responsible for setting the new framework that will govern open banking in Australia.

  • Treasury drafts the legislation establishing the statutory rights and powers.
  • Australian Competition and Consumer Commission (ACCC) creates the rules covering sector designations, outcomes, accreditation criteria and the required infrastructure.
  • Data61 (part of government agency, the Commonwealth Scientific and Industrial Research Organization – CSIRO) sets the technical standards through consultation with the industry.
  • Office of the Australian Information Commissioner (OAIC) manages data privacy law changes and adherence to the Australian privacy principles.

Coordinating across each organization, while securing industry input, is likely to be more difficult during the tight initial implementation timeframes. Reaching agreement on complex topics of accreditation, consent, enforcement, penalties and data security may be difficult - and could delay the rollout.

A complicated regulatory environment is also likely to increase the cost and complexity for Australia’s financial institutions to meet open banking rules. Making the most of open banking will depend on their ability to do more than just comply.

regulation trust and consumer sentiment info graph

Banks must think beyond compliance

Maximizing the benefits of open banking, both for consumers and financial institutions, will depend on companies’ ability to use innovation to drive more value from the mandated changes that are on their way.

For Australia’s big four banks ― which dominate about 80% of the market ― the challenge will be to embrace, rather than resist the impact of open banking. Our Index ranked Australia sixth in terms of innovation ― not a poor result, but with room to improve. Where are the greatest opportunities for banks to innovate?

At the simplest level, open banking offers opportunities to financial institutions to redesign the customer journey, by making it easier to assess, select and manage their finances through rich interface. For example, banks could, with customer consent, help customers select the most appropriate product, maximize their savings, avoid fees and monitor their “financial health” across institutions. Banks could also look at the “whole of customer” transactional information across institutions to advise on appropriate loans, or suggest the best savings accounts.

Australian consumers are relatively mature adopters of FinTech services, with 37% of digitally active consumers using two or more services. For Australia, the adoption challenge will be providing open banking services that consumers feel support them in achieving their goals. The findings reflect the interesting disparity of views among Australian consumers, who are mostly urban, often early technology adopters, but also have conservative attitudes toward privacy and security.

The innovation environment will continue to grow as Australia’s vibrant FinTech community looks to leverage open banking, and increasing internet speeds in rural areas, coupled with rising mobile adoption, reduces consumer barriers to entry.

Moreover, once adopted, Australia has the potential to amplify the consumer benefits as the CDR expands to other industries.

Building consumer trust is the priority

Our Index surveyed consumer sentiment toward open banking, using online discussion analysis. We found Australian consumers were largely positive toward the concept, but trust around security of data came through as a concern.

Australia was the top performer on net online sentiment, with 40% of all posts expressing positive sentiment - positive discussion was focused on service innovation and consumer choice. In the consumer survey, while Australians ranked ninth on sharing transaction data with FinTechs; they jumped to fifth when asked the same question, but with a further assurance that there would be effective controls over the security of the data exchange.

Consumer sentiments insights: Australia vs. global info graph

Educating consumers about the benefits of open banking, which include offering products and services that help them save and better manage their money, can enable open banking participants to rebuild trust, and position them to innovate more broadly. This could include using a holistic view of consumers’ financial behavior to design entirely new products and services. Or, as Australia’s open banking ecosystem expands to include energy, telecommunications and eventually other industries such as health and retail, banks could consider cross-sector partnerships to further drive innovation.

Progressive participants can leverage their brand beyond finance to offer consumers an entire suite of “lifestyle” services. This is similar to models adopted by some of Australia’s biggest airlines and retailers, and has proven successful in other Asian markets. These models succeed because they have a holistic view of customers - including the products and services they want and how they like to experience them. If banks can use the data available in open banking to develop that deep understanding, they can design and deliver different products and services that add more value and build deeper customer loyalty.

Challenger banks should move early

But, open banking is also a huge opportunity for Australia’s tier-two and challenger banks. These banks have a further one-year delay to adopt open banking. They could be tempted to use this as an opportunity to wait and see. However, global experience is that this delays the compliance activity, leaving others to test and learn their competitive positioning and partnerships. Our advice would be to move now to understand how to compete, rather than wait for the compliance deadline.

With both the big and smaller banks subject to the same open banking rules, the challengers have a rare opportunity to leverage customer insights and gain market share from the major institutions. Those that think cleverly about how to compete, rather than just comply, and use their own brand strengths which are often in customer experience, will be in an excellent position to unlock the value of a market currently dominated by incumbents. Tier-two banks may want to consider collaborating as a group, to better leverage their investment in open banking and compete more effectively.

Competition from global players and tech companies

Both Australia’s big four and tier-two banks will need to consider strategies to compete against new players in an open banking world.

The commonality of Australia’s open banking standard with that of the UK and other jurisdictions lowers barriers of entry for global companies, both from the financial sector and beyond. Many of the world’s tech giants already offer payment services. They have won huge consumer favor with Australians who, as our survey found, are relatively mature adopters of FinTech services ­— 37% of digitally active consumers use two or more services.

The ability of newcomers to the sector to use application interface programs (APIs) to access a wealth of customer data previously available only to incumbents puts them in a position to move fast. These new competitors often bring new technologies and platforms, a nimble culture and an ability to innovate and iterate more quickly than any incumbent.

Embedding innovation across the business

The onset of open banking in Australia will change the nature of the competitive landscape, not just in finance but across sectors. Consumers will benefit from better services and prices, and more choice. For financial institutions, the opportunities to use open banking to deepen relationships with customers, develop new products and services, and even explore new roles are huge - but there will be lots to do to unlock the real value of the upcoming changes.

The key message to all players is to recognize the complexity and diversity of the work required to prepare for open banking. While it’s true that the right technology tools and capabilities will be imperative, this is not just a technology problem. Innovation will be central to success in open banking, but standalone initiatives will not be enough. Embedding a culture of innovation, collaboration and partnerships will be essential - and may offer smaller banks and newcomers an edge over the incumbents.

For Australia’s major banks, open banking presents a strategic dilemma about where they would like to position themselves in this new ecosystem. Will they merely comply and risk becoming relegated to the status of a utility provider? Or move to own the customer experience? Can they innovate and pioneer the next game-changing ecosystem with frictionless access to financial products and services? Do they want to become the go-to institution for customers - not just for financial services, but in many aspects of their lives? And, how could new partnerships help achieve these goals?

Whichever strategic direction they choose, maintaining consumer trust must be a priority - without it, banks simply cannot move forward to leverage the opportunity of Australia’s open banking revolution.

Author contribution by Mike Booth, Director, EY Australia Financial Services.

  • About the EY Open Banking Opportunity Index

    The EY Open Banking Opportunity Index assesses the conduciveness of open banking to thrive across 10 selected markets. Success is viewed as the potential for consumers to adopt open banking-enabled services within a market.

    Our model uses a wide range of measures — 22 indicators and 13 sub-indicators — to assess each country’s potential, across four key conditions needed for the success of open banking: regulatory environment; adoption potential; consumer sentiment; and innovation environment. 


The introduction of open banking in Australia will be complex and costly for banks. Maximizing its benefits will depend on banks’ ability to build consumer trust to drive innovation. 

About this article

By Mike Booth

Ernst & Young – Australia Banking Technology Leader

Financial services technology advisor. Passionate about Open Banking, platform transformation, data leverage, digital ecosystem, security and financial risk management. Outdoor cinema enthusiast.