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Is Australia’s open banking system falling short?
The era of open banking in Australia has arrived, but are consumers being let down by accuracy problems with the data involved?
Is Australia’s open banking system falling short?
The era of open banking in Australia has arrived, but are consumers being let down by accuracy problems with the data involved?
Effi CEO Mandeep Sodhi has warned that Australia’s new open banking system isn’t quite living up to expectations.
Although Mr Sodhi admitted that the ongoing rollout of the Open Banking Act has been beneficial to customers and lenders, he argued that more needs to be done for the system to reach its full potential.
“It’s great that we now live with open banking, but it’s becoming very clear that more still needs to be done for the system to be effective for its intended purpose.”
Mr Sodhi said that two out of five products covered by the Consumer Data Right legislation are missing basic information such as loan purpose or rate.
He revealed that when Effi looked to make home loan data available to mortgage brokers using their API, they found that over 1,700 products in the open banking system lacked a defined purpose. Meanwhile, 4,882 products underwent at least one critical data point correction, with 7,539 corrections overall.
“This makes the data mining functionality very limited and creates concern for the level of trust we can place in the data that is actually provided,” he said.
According to him, “There will be little to no uptake of the open banking system if the right information is not available and end-users won’t see the advantage.”
He warned that this could have “a flow-on effect” on any future open banking initiatives.
“Correct and available information will build more trust, awareness and competition in the market,” he said.
The push towards open banking in Australia began back in 2018, when the federal government agreed to pass the Consumer Data Right legislation and announced a phased rollout timetable for the financial sector.
As of July 2021, both major and minor financial institutions in Australia have adopted open banking.
By February 2022, the industry is expected to have fully adopted open banking for not just savings accounts but also financial products and services like home loans, trust accounts and asset finance.
Mr Sodhi explained that while the ACCC protects consumer data that is used in the open banking system, “there is no regulation from the other side”.
Asked to clarify, Mr Sodhi recommended making key information that is currently optional under record-keeping requirements mandatory instead. He said that this “will make it easier for brokers and ultimately borrowers to identify, compare and switch to cheaper home loans using the filter or search criteria from vet information”.
Reached for comment by nestegg, an ACCC spokesperson reaffirmed that the organisation “is responsible for ensuring that ADIs make CDR product data available in accordance with the CDR Rules and Consumer Data Standards.”
According to them, “product data available via the APIs is regularly updated as product details change and more ADIs and products are added to the ecosystem, and we expect the CDR will continue to mature over time”.
The ACCC said that they had not received any contact from Effi regarding the quality of CDR product data available, but encouraged “interested parties” to come forward and get in contact with them if they have such concerns.
“We are continuously monitoring and investigating to improve CDR data quality,” the ACCC said.
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