What is open banking?

What is open banking?

Open banking is a way of giving regulated companies, secure, limited access to your bank account, with your permission, so that they can provide services that are helpful to you. For example, budgeting advice, or recommendations for other financial products that you are eligible for.It's just as safe as using online banking, and it's safer than paying with a credit or debit card:
  • Nobody gets access to your login details or banking passwords.
  • You control who sees your banking information.
  • You control their level of access to your account.
  • Companies can't take any payments without your authorisation. In fact they can't do anything that you don't specifically permit them to do.
For businesses, open banking is a technology that can enable them to take payments and fetch data directly from a customer’s bank account, with express permission, via open APIs. It has ignited a new generation of financial services, enabling businesses to build products that increase engagement, reduce costs and transform the customer experience.

How can open banking be used?

A good way to think about open banking is that it makes financial services more useful for you. For example, instead of having to log in to all your bank accounts separately, you can use one app to see all your accounts in one place. And instead of having to print or upload paper bank statements to prove your earnings and financial situation to a mortgage lender, for example, you can connect your bank account to that lender – online and hassle-free.Businesses can use open banking to accept online payments from customers, accelerate new customer onboarding and to provide value added services to customers. For a complete list, see our blog post on open banking use cases for businesses.

What can open banking do?

As a consumer, open banking allows you to grant secure access to your bank account so that information about your income and expenses can be used to provide useful services to you, such as budgeting advice, or recommendations for other financial products you're eligible for.It can simplify money management in several ways and can also allow you to make secure payments more easily than with conventional online banking.Although open banking is a relatively new concept, it is already changing the way people use their bank accounts, for the better.For businesses, open banking can reduce costs, reduce risk and improve customer experience. We cover the benefits of open banking for businesses and consumers in more detail in the section below.One example of how useful consumers are finding open banking lies in the UK, where 4 million people and businesses are already using open banking-enabled apps and services in their daily lives. At the current rate of growth, 60% of the UK population will use open banking by September 2023.

How does open banking work?

Open banking works differently in different countries but generally it involves banks or financial institutions opening up their financial data to third party providers, through open Application Programming Interfaces (APIs). The scope and format of that data varies and often depends on the specific regulations and implementation standards of a particular country. In Australia, open banking began in 2020 with the Consumer Data Right (CDR).Initially, the biggest four banks were required to adopt standards for allowing secure access to customer data, and from November 2020, allow customers to request and share their transaction account, deposit account, credit card and debit card data with an ‘accredited data recipient’, an open banking participant who has gone through the CDR accreditation process and appears on the CDR register. From 1 July 2021, all banks and authorised depository institutions (ADIs) were supposed to be prepared to do the same, although many received exemptions to give them more time. From 1 November 2021, home and personal loans were added to the Australian open banking list. A range of new financial products are included from 1 February 2022, from overdrafts and lines of credit to foreign currency accounts and business finance.Open banking information in Australia is made available in a secure, standardised way, through APIs. This makes it easier for companies to use the data to build services that are useful to consumers.

What are Data Holders (DHs) and Accredited Data Recipients (ADRs) in open banking?

Data Holders (DHs) are businesses that hold consumer data, such as a bank or credit union, and must transfer the data to an accredited data recipient at the consumer’s request.Companies that use open banking data in order to provide products and services to consumers are known as Accredited Data Recipients (ADRs). In Australia they are authorised and regulated by the Australian Competition and Consumer Commission (ACCC).

How is open banking regulated?

There are different regulatory frameworks for open banking around the world, but most start with the fundamental principle that consumers have a right to access their bank accounts and financial data via accredited third party providers (and banks must facilitate this access).Most frameworks also include a regulatory or overseeing body who grants third party providers the permission to deliver open banking services. In Europe for example, under the Revised Payment Services Directive (PSD2), payment service providers must allow their customers to securely share their data with third parties. In each member state there is a national competent authority which oversees PSD2 and gives providers permissions to use open banking. For example:
  • The Autorité de contrôle prudentiel et de résolution (ACPR) in France
  • The Federal Financial Supervisory Authority (BaFin) in Germany
  • Banco D’Italia in Italy
There is also an overarching regulator for banking in Europe, which is the European Banking Authority (EBA).In the UK, the Payment Services Regulations (PSRs) are the UK equivalent of PSD2 and create the legal and regulatory framework for open banking. Open banking is regulated in the UK by the Financial Conduct Authority (FCA). Only companies that are authorised by the FCA can use open banking to access financial information from consenting customers.The Consumer Data Right (CDR) is the Australian equivalent. It goes further than what has been seen to date in Europe or the UK as it expands beyond banking to energy, telecommunications data and likely superannuation and insurance in the future. The CDR enshrines in law the principle that a consumer’s financial, energy and telecommunications data is theirs to share and make use of. The Australian Competition and Consumer Commission (ACCC) is responsible for implementing and regulating the CDR system. Strong privacy protections will be enforced by the Office of the Australian Information Commissioner (OAIC) and the ACCC.

What are the benefits of open banking for consumers?

For consumers, open banking provides the following key benefits:
  1. It can simplify the way you manage your finances. Accredited Data Recipients (ADRs) like Finder and Intuit for example can pull together information from multiple bank accounts into one app.These use cases could help you to budget better and save money. For example, such apps may help you to see your total financial picture and show you where you're paying too much for a utility bill, credit card or overdraft.
  2. It can allow you to make payments quickly, easily and securely. Paying by open banking is faster than making a conventional online payment, especially on mobile. There's no need to type in your card details or log into your bank account. Once you've decided what you want to buy, you simply select your bank's name from the on-screen list and securely verify your payment using fingerprint or face ID. This takes just moments and the money is transferred instantly. It's as easy as using a touchless credit card in person and it uses bank-grade security.
  3. It can provide proof of income for rental agreements, mortgages, loans and investments. Regulated companies can, with your permission, use open banking to get an overview of your income and expenses, for example so that they can make a fast decision on your loan or rental application. You can also sign up to some services and apps faster and without having to upload or print copies of payslips and bank statements.

What are the benefits of open banking for businesses?

For businesses, open banking also offers significant benefits:
  1. It can make online accounting easier by giving your accountant safe, secure access to your financial records. Some accounting packages use 'screen scraping' to access your bank account. This isn't ideal from a security perspective. Open banking is a safer way for online accounting software to access your bank account in realtime. It can even help classify business expenses for tax and accounting purposes.
  2. It can help you access capital more easily. With your permission, potential lenders can use open banking to get an overview of your business finances so that they can make a fast decision on your loan application, or you can build APIs that help you to do the same for your own customers. For example, Regional Australia Bank has built engines that help it with credit assessments and identity verification of existing and potential customers who are looking for credit.
  3. It can help you take payments online: with low fees, low fraud and high conversion. Any business that transacts online can take advantage of open banking to help them take instant bank payments, without using card networks.
  4. It can help you accelerate customer onboarding. If you need to collect financial information from your customers at sign up, such as proof of income or proof of bank account ownership for a payment, open banking can help you do that in a secure, automated way.
See our complete list of open banking use cases for businesses.

Is open banking safe?

Open banking is one of the safest ways to make a payment or share your financial data. As a consumer, you control:
  • what information is shared
  • which providers you allow to access your information
  • for how long they will have that access
  • all payments
You never have to give your password or login details to any organisation. Accredited open banking providers in Australia:
  • can only access your account if you have given it your explicit consent must only access the data, or initiate the payments that you have specifically consented to
  • destroy or de-identify your data if it is no longer needed
  • comply with the Notifiable Data Breaches scheme, including by telling you and the Office of the Australian Information Commissioner (OAIC) about any serious data breach.

How can I find an accredited open banking provider?

A register of Accredited Data Recipients (ADRs) and Data Holders (DHs) under the Consumer Data Right (CDR) is held by the Federal Government on the Consumer Data Right website.

How does it work when you transfer data to an accredited provider?

Australian open banking technology uses application programming interfaces (APIs) to handle the data transfer process electronically and automatically.The official data sharing standards are called the Consumer Data Standards and have been developed by the CSIRO’s Data61. The privacy requirements are covered by the Office of the Australian Information Commissioner (OAIC).There is a five step process for consumers using open banking in Australia:
  1. Give consent to the Accredited Data Recipient (ADR) to access the data.
  2. Verify identity using a single-use password.
  3. A digital link to the existing Data Holder's (DH) website or app allows the user to manage the data they are sharing.
  4. The data is shared.
  5. The user can now use the ADR's service.

Why use an open banking intermediary?

Some third party providers choose to connect with individual banks’ APIs themselves through open banking. However, maintaining these connections can be difficult and resource intensive. That’s why some providers use an intermediary like TrueLayer – a company that specialises in connecting to all the banks itself, and provides its clients with a single API. Here are some of the advantages and disadvantages of connecting directly vs connecting via an intermediary like TrueLayer.
Directly connectingConnecting via intermediary
CostHigh setup and operational costs. No transaction cost.Low set up and operational cost. Small per transaction fee.
Speed to market3-12 months to get authorised. Additional time to integrate with individual bank APIs.Less than 3 months to integrate. (one standardised API)
Operational overheadHigh. Bank relations, technical maintenance, customer consents, data security – all managed in-houseLow. Bank relations, technical maintenance, customer consents, data security – managed by intermediary.
ScopeMore limited. Building your own connectors means you must rely on your own in-house resources to connect to all bank APIs, and generally only Australian banking APIs.Typically wider scope, depending on the provider. Intermediaries often integrate with more banks, have access to more data through direct partnerships and can connect you to open banking APIs in other countries.
ConversionMediumHigh. You can often achieve better conversion rates through an intermediary.

Which banks/Authorised Depository Institutions (ADIs) support open banking?By the end of July 2021, just 17 banks and ADIs were registered for open banking in Australia as Data Holders. You can see the full registry of Data Holders and Accredited Data Recipients here.

What accounts can I use open banking with?

From 1 July 2021, consumers are able to use open banking services offered by ADRs for savings accounts, call accounts, term deposits, current accounts, cheque accounts, debit card accounts, transaction accounts, personal basic accounts, gst and tax accounts, credit and charge cards (personal & business).From 1 November 2021, that extends to products including home loans, personal loans, and mortgage offset accounts. From 1 February 2022, Phase 3 adds business finance, investment loan, lines of credit (personal & business), overdrafts (personal & business), asset finance (including leases), cash management accounts, farm management accounts, pensioner deeming accounts, retirement savings accounts, trust accounts, foreign currency accounts and consumer leases.

Can I use open banking with business/SME accounts?

Yes. Business and SME users will be able to use open banking in Australia for a range of accounts including credit cards from July 2021, and overdrafts and business finance from February 2022.

Can I use open banking with credit cards?

Yes. Consumers and businesses are able to use open banking in Australia for credit cards from 1 July 2021, as per the phased rollout. Australia’s CDR is being rolled out in stages. Initially, it applied only to the banking sector, followed by energy and then telecommunications. Other sectors may also be included, such as insurance and superannuation.Within banking, there is a phased rollout. The Big Four banks are first, then the smaller banks, then the Accredited Data Recipients (ADRs). Additionally, there is also a staged approach to adding increasingly more product data sets or “product reference data” starting with savings accounts, then moving to loans and finally more complicated business banking products and leases.

What is the timeline for open banking in Australia?

Open banking in Australia kicked off in 2020, with a phased rollout covering products including transaction accounts, term deposits, credit cards, loans, mortgages, trade finance, and lines of credit. 1 July 2020: Open banking starts for major banks with the inclusion of Phase 1 products, such as credit cards, transaction accounts, term deposits for major banks. 1 November 2020: Launch of open banking with major banks for Phase 2 products, including a limited range of credit products such as mortgages.1 February 2021: The final phase of the rollout for major banks.March 2021: Reciprocal Data Holders are included in the Phase 1 rollout.1 July 2021: Non-major Authorised Depository Institutions (ADIs) are included in the Phase 1 rollout. Reciprocal Data Holders launch their open banking phase 2 & 3 stages.1 November 2021: Non-major ADIs roll out Phase 2.1 February 2022. Launch of open banking with non-major ADIs for products such as business and investment accounts. Phase 1: Savings accounts, call accounts, term deposits, current accounts, cheque accounts, debit card accounts, transaction accounts, personal basis accounts, GST or tax accounts, personal credit or charge card accounts and business credit or charge card accounts.Phase 2: Residential home loans, investment property loans, mortgage offset accounts and personal loans.Phase 3: Overdrafts (personal and business), business finance, investment loans, lines of credit (personal and business), asset finance, cash management accounts, farm management accounts, pensioner deeming accounts, retirement savings accounts, trust accounts, foreign currency accounts and consumer leases.

Can I use open banking for payments in Australia?

Not right now. While customers of the Big Four Banks were allowed to request and share data about scheduled payments and payee data from the initial launch phase in 2020, and that right extended to all other banks and Authorised Depository Institutions (ADIs) in July 2021, it is not possible yet to make payments using open banking.

What is the current situation with open banking payments in Australia?

There are few payments services available in Australia to date, but more are expected to launch in 2022.Currently the CDR is limited to “read access” only, meaning that consumers can only “read” the data that is on their account and share it with others for a broad range of use cases. Like the UK, the plan is for the CDR to be extended to “write access” allowing consumers to make payments via open banking and to request actions to be undertaken on their behalf like switching accounts or updating their account details. The Government has announced it will publish its response to “write access” later in 2021. The "write access" recommendation was among a number of other recommendations made in the December 2020 Future Directions Report to improve the CDR. Outside of the CDR, the New Payments Platform have announced that they will release an enhanced functionally called ‘Payto” which will enable similar functionality to open banking payments under the CDR.The New Payments Platform (NPP) was launched in 2018 and is open access infrastructure for fast payments in Australia. It was developed alongside industry to allow everyone from households to government agencies to make real-time payments. Global consultancy Accenture describes the NPP as "the rails that provide the means to transfer dollars and packets of data between parties in real time" and open banking as allowing "private operators run trains on those rails – allowing them to develop functions that can take advantage of the opportunities NPP brings".

Open banking examples

Here are a selection of apps that currently offer open banking services in Australia.
FintechOpen banking serviceWays to use itAccreditation
Regional Australia BankPersonal loan assessment tool and data sharing with fintechs.Streamlines loan applications by automating income and expense verification, using actual amounts based on real transaction data.Data Holder, Data Recipient
Credit SimpleA credit score and financial information app.Shows users their credit score and financial information, and with the option of receiving offers based on that data.Data Recipient
IllionPlans to use credit data as part of its open data products for businesses.Businesses will be able to use the open data product for lending and verification.Data Recipient
IntuitWill integrate open banking tools into its accounting software.Users will be able to feed financial data into the Intuit accounting engine using open data.Data Recipient
FinderPlans to use personal financial data to offer targeted product recommendations.Users will be able to use their data to more closely tailor financial products from Finder's comparison website.Data Recipient
FrolloThe budgeting app allows users to connect their bank accounts with the app securely.See financial accounts from a variety of sources within the one app.Data Recipient

Open banking and TrueLayer

TrueLayer is a global open banking platform. Businesses use our open banking network to securely access financial data and enable instant payments. For example, if you top up your Revolut, Nutmeg, Freetrade or Trading 212 account in the UK or Europe, you’re using TrueLayer in the background. More than half of the open banking traffic in the UK, Ireland and Spain goes through TrueLayer and our payments convert 20% higher than other open banking providers, with services that allow consumers to view their accounts in one place, or pay from their bank without having to enter credit card details. TrueLayer's APIs are fully compliant with UK and European Open Banking standards. TrueLayer will be licensed as an Accredited Data Recipient (ADR) in 2021, and will launch its first Australian API in February 2022. TrueLayer also provides electronic money services to its merchant clients and acts as a technical service provider or intermediary for regulated open banking providers. We are also planning to roll out our agent model in Australia, which helps merchants who are not regulated yet to access open banking, once Treasury finalises rules for doing so.

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