The Australian Competition and Consumer Commission (ACCC) has delayed the start of Open Banking to allow for more testing.
Background on Open Banking
From February, major banks were due to start sharing data on debit and credit cards, deposit and transaction accounts. This has now been pushed out to July 2020. Under the new timetable, major banks will need to share data on mortgage and personal loan accounts from November 2020.
Open Banking is expected to improve competition in the financial sector and allow smaller players to compete more easily with larger competitors. Under Open Banking, banks must share customer data with other banks and businesses, when directed to do so by the customer. This will make switching providers much easier for customers as information such as direct debits can be transferred automatically.
The major banks including National Australia Bank Ltd (ASX: NAB), Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ), and Westpac Banking Corp (ASX: WBC) hold vast quantities of customer data. Smaller banks, fintechs and neolenders could benefit from access to this data. Access to customer data allows for greater insight into customer spending and more accurate credit decisioning.
The Open Banking regime is intended to allow for the development of products and services that are tailored to individual needs. Services that use individual customer data to provide customised, yet automated, outcomes are envisioned. These could include:
- "super applications" that allow customers to view accounts across multiple providers from a single interface
- comparison services that use customer data to provide tailored product recommendations from panels of financial institutions
- personalized financial management software.
Why the delay?
The ACCC has attributed the delay to the need to ensure the Open Banking system is sufficiently robust and secure. ACCC commissioner Sarah Court told the Australian Financial Review that they are committed to delivering Open Banking, but "only after we are confident the system is resilient, user-friendly and properly tested."
Delays to the implementation of the Open Banking regime will mean banks will not need to share data for a few months longer. This will benefit those banks that hold the majority of data, but is a temporary setback for fintech competitors such as Wisr Ltd (ASX: WZR) and Prospa Group Ltd (ASX: PGL). The impact will inevitably be shortlived, however, as Open Banking will roll out sooner rather than later.
