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Broking fintechs slam ‘blatant ‘shut down’ campaign’ on open banking

by Annie Kane14 minute read

Calls from the banking industry to ‘go back to the drawing board’ on open banking are “a blatant ‘shut down’ campaign”, according to broking industry fintechs.

On Wednesday (3 July), the Australian Banking Association (ABA) released the findings of a strategic review undertaken by Accenture into the roll-out of Australia’s Consumer Data Right (CDR) regime, suggesting that there was little hope its objectives would be met.

While the CDR went live to customers of major banks in July 2020, it has been slowly rolling out to other parts of the finance industry – including brokers (under the ‘trusted adviser’ model) – in the last few years.

The majority of use cases for open banking are in lending, credit, and broking, but there are still major issues with data quality and accuracy being input into the system. In fact, nearly half of mortgage product data in the open banking ecosystem has quality issues.


However, the system aims to enable borrowers to more quickly access and share data about their financial products and – if ‘action initiation’ legislation passes (which is being debated in Senate this week) – enable them to more quickly change product/lender.

In the ABA-commissioned Accenture report, the banking industry has suggested that the cost of building CDR systems has outweighed the benefits.

According to the report, the banking industry has invested around $1.5 billion into CDR since 2018, but only 0.31 per cent of bank customers were using it (and more than half of data-sharing arrangements had been discontinued or allowed to lapse throughout the year).

Noting the high compliance costs (which are disproportionately higher for smaller banks) and the alleged lack of competitive benefits, the ABA is calling the open banking regime a failure and suggesting that the government should ‘go back to the drawing board’.

ABA CEO Anna Bligh said: “Despite the best efforts of Government, regulators and industry, this review makes it clear that CDR has not realised its potential.

“Australians have enthusiastically embraced digital innovations in banking such as mobile wallets and PayID, however uptake of the CDR has been comparatively low.

“It’s time to go back to the drawing board. The current CDR regime isn’t delivering for customers or enhancing competition and a new pathway forward is needed.”

The Customer Owned Banking Association (COBA) has also flagged issues, with CEO Michael Lawrence saying customer-owned banks had collectively invested over $100 million in CDR, with little pay-off.

“While we support the intent of the CDR to increase competition, it has actually made it more difficult for smaller banks to compete by tying up resources with little to no tangible return,” Lawrence said.

“Before smaller banks commit more resources, we ask for a clear roadmap to ensure the CDR delivers on its original intent to improve competition.

“Forging ahead without addressing these foundational issues will further erode competition and divert essential investment away from improving customer outcomes and supporting local communities.”

Treasurer Jim Chalmers MP told journalists on Wednesday that the CDR “has very high compliance costs and has had very low take-up”.

“We will work methodically through those sorts of issues in a legislative sense but also working with the various stakeholders to see if we can get it right,” he said.

‘Not advancing CDR pushes the industry back into the Dark Ages’

However, members of the fintech industry operating in the broker space have called out the banking industry for its vested interests in trying to shut down the ability for borrowers to more easily access a better product or change lender/product.

Speaking to The Adviser, repricing fintech Sherlok – which uses open banking data to help brokers track their client’s home loan interest rates, identify if the rate is uncompetitive, and then the data is used to automatically lower the interest rate with the existing lender or refinance them elsewhere – said it believed that the CDR system was delivering great benefits.

According to Sherlok, CDR data enabled brokers to save their clients $77 million in home loan interest from repricing in the six months of July to December 2023.

The average rate reduction for all successful reprices with the existing lender was 0.48 per cent and the annual interest saved for a single home owner from repricing was $35,402.

Founder and CEO Adam Grocke said he believed these were “great outcomes”, which would be doubled or tripled if action initiation legislation passes.

Speaking to The Adviser, Grocke hit back at the banking industry’s attempts to stall open banking’s progression: “This is a blatant ‘shut down’ campaign from some banks to reduce competition on the day the government votes to advance CDR to action initiation.

“CDR, and in particular action initiation, scares the living daylights out of the banks because they lose control of the customer and competition increases. Not advancing CDR pushes the industry back into the Dark Ages.

“CDR increases competition, gives Australians freedom and choice, increases productivity and innovation. We all know increased competition equals better deals and savings for Australian home owners and therefore results in the banks losing market share … No wonder they care so much to have a strong opinion on its success.

“We’re at the ‘laying the foundation’ stages of CDR. Saying it’s costing too much and that there are no results is like looking at a freshly poured slab of a new house and saying let’s stop because there’s not a house yet. It’s just crazy! The foundations have been poured, now it’s time to build a masterpiece.”

The Sherlok CEO said he hoped the government and ACCC would come out strong to back CDR and send “a clear message to data holders (lenders, banks) to stop complaining and get on with it” and introduce greater fines and sanctions to those who are not complying with the regime.

Similarly, Mandeep Sodhi, the CEO of fintech Effi (which provides a range of open banking tools to brokers), said it was “disappointing” to see so much focus on the apparent failures of open banking without delving into the reasons for its existence and the significant benefits it offers.

Sodhi explained that he believed CDR not only provided greater transparency to users (thereby helping borrowers understand their financial wellbeing) but also reduced reliance on screen scraping.

“It appears the authors of the Accenture reports never reached out to fintechs to grasp the true potential and existing use cases of open banking, which extend beyond what they have covered,” he said.

“Additionally, banks have been quick to complain about the $1.5 billion spent on open banking, yet they have not made efforts to streamline their own processes. For instance, they could facilitate easier customer switching by providing discharge authority within internet banking or accepting open banking data from other lenders.

“Highlighting problems without proposing solutions is easy, but it’s worth noting that many solutions are emerging and already benefiting Australians. Effi, for example, has seen numerous use cases from its clients where brokers use open banking to ensure borrowers remain on a good rate at all times.

“Perhaps banks could learn from brokers on how to use open banking and revamp their outdated processes.”

What do you think about the banking industry’s pushback of the CDR? Let us know in the comments below!

[Related: CDR action initiation would benefit brokers, FBAA tells Senate]

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