What can we expect as non-major banks join the open banking party from July 1?

• Non-major ADIs to join Consumer Data Right from July 1

• Data sharing initially limited to savings accounts, bank accounts etc.

• Big four already required to share customer data

• 1 in 3 customers would swap banks for open banking features - Frollo

It’s been almost 12 months since the doors to open banking in Australia were first opened with the initial launch of the Consumer Data Right (CDR) in July 2020.

But a party's not complete without all of its guests, which is why July 1, 2021 will mark an important milestone - it’s the date when the doors to the open banking party will be well and truly thrust open.

From the start of next month authorised deposit-taking institutions (ADIs) outside of ANZ, Commonwealth Bank, NAB and Westpac - essentially the rest of Australia’s banks and credit unions - will need to be capable of sharing their customers’ data under CDR.

Initially, customers of these institutions will only be able to request data sharing on a limited number of accounts such as savings accounts, term deposits, bank accounts, debit cards and credit cards though.

That will then be expanded to home loans and personal loans from November 1, 2021 and to a whole range of other products including business finance, lines of credit, overdrafts and foreign currency accounts from February 1, 2022.

“Open banking is a major step forward in consumer rights,” said Mozo Data Researcher, Meredith Allan. “The Consumer Data Right system of securely sharing personal banking information between providers with the individual’s consent promises to create a smooth experience of switching banking products, keeping track of income and expenses, or assisting with loan applications.”

“When complemented with product data, banking customers will have much less of a barrier to change their accounts, potentially increasing the demand for more competitive offerings from banks.”

Australia’s four major banks have been required to be ahead of the pack on Consumer Data Right integration. Part of the initial rollout in July 2020, all four are now obliged to share deposit account and loan data (should customers request it) with accredited Data Recipients.

So far the number of active data recipients is relatively small, featuring banks like CBA and Regional Australia Bank, and third parties like fintech and money management app Frollo. But this list is expected to grow as more customers are able to start sharing their data.

“At the moment, we are limited by the gradual process of the roll out and the small number of accredited providers, but hopefully we will see much more on offer and banking customers using their own data very soon,” said Allan.

“As more ADIs and third parties go through the process to become Accredited Data Recipients there should be some exciting developments for how this data is used.”

An appetite for convenience

As the Consumer Data Right expands out in the coming months, one of the major points banks and other players involved in the banking ecosystem will be interested in monitoring is the appetite consumers have for open banking features.

In fact, it’s a topic Frollo has already started to look into. Recent research conducted by the fintech found that one in three consumers (36%) would consider switching banks in order to get access to the new, convenient features open banking is likely to provide.

What kind of ‘open banking-powered’ features are these you ask? Well, Frollo found that:

• 74% of survey respondents would utilise a transaction insights and categorisation feature to better understand their spending

• 68% of respondents would use an account aggregation feature which would display various bank and financial accounts from different institutions in one place

• 63% of respondents would take advantage of an income and expenses verification feature to make home loan or personal loan applications faster

• 58% of respondents would use a product comparison feature to compare their products to those from different institutions

According to Frollo chief executive, Gareth Gumbley, these kinds of open banking features and tools won’t only benefit customers, they’ll also provide points of difference for smaller and up-and-coming financial institutions.

“The Consumer Data Right is meant to bring about more competition and innovation, and ultimately a better deal for consumers. This [research] shows that there’s a real opportunity for tier 2 banks, lenders and fintechs to compete for customers by providing them with new, innovative user experiences and products using Open Banking data.”

RELATED: Frollo app gets a makeover with new features, further open banking integration

Ready to delve deeper? You’ll want to check out our open banking guide for a full run through of open banking and the Consumer Data Right.

Or if you’re interested in similar topics then why not check out our dedicated fintech hub for the latest news and guides.