Open Banking in the Land Down Under

Asia-Pacific is a leader when it comes to Open Banking, thanks to the region’s extensive digital ecosystems and its consumers’ willingness to share data. Both financial institutions and tech firms have developed data-sharing infrastructure, and adoption rates are high in many countries belonging to the region. 

Australia isn’t ahead of the pack in the region, but it is certainly moving methodically towards a well-planned Open Banking rollout. The land down under is using Open Banking to incorporate consolidated banking by giving control back to customers and is doing so in phases. In July of 2020, Open Banking was launched through four major banks and all the other banks are expected to follow in 2022.

Despite these key milestones, Australia is adopting Open Banking slower than expected by many fintechs. They are, however, making notable progress in pushing the financial market to open up their banking services online by signing additional data holders in 2021.

Strong Data Policy Creates the Right Foundation

Australia already has a strong data sharing policy called consumer data right (CDR) which is being incorporated as part of its foundation for Open Banking in order to ensure safe and secure transfer of consumer data.

CDR is encouraging banks and payment service providers, who are the data holders, to share data about essential account information when requested. Making it clear that consent by the data owner, in this case being the consumers, becomes crucial in any Open Banking transaction. This is strengthened by a commitment to user experience guidelines and financial application programming interface standards with attention to security already adopted within the country.

CDR prescribes that data holders should follow financial-grade API profile to standardise on the data schematics (JSON) and program interface (REST) to accelerate Open Banking adoption. Security and privacy can be consistently implemented through OAuth2 and OpenID Connect providers. This means every digital customer and open banking service provider will be able to transact with higher assurance of safety and interoperability. 

Managing Security in the Open Landscape

With Open Banking comes the need for expanding digitalization which widens the threat landscape related to financial crimes. It has provided organized crime and cybercriminals with increased opportunities for identity theft and various online fraud in the digital space. If not managed correctly, these online threats can erode trust in the banking relationship. Refer to our recent Financial Crime and Fraud Report for further insight on this subject.

At HID Global, we recommend a balanced consumer experience strategy in adopting Open Banking to provide trusted identity, password and authentication solutions throughout the customer journey while being fully compliant with CDR:

• Adaptive authentication that allows for a user to choose from various methods of proving their identity, including security tokens and biometrics
• Stronger forms of authentication such as simple mobile push authentication are highly recommended for customer logins since SMS is no longer enough. This improves the authentication method level of security mentioned in the CX guidelines.
• A positive user experience from start to finish

Some Organizations Move Ahead of The Regulations

Regulations have evolved in tandem with Open Banking developments to reduce risk and protect against fraud around the world. The financial industry, however, stands at an inflection point. As offerings expand and consumers demand more customization, choice and control, the companies that win will be those that go beyond what’s required by regulations to align with customer needs.

In Australia, we see that the ecosystem is very much enabled through four major banks who have moved ahead of the pack by already offering Open Banking services. These four banks (CBA, Westpac, NAB and ANZ) cover a large portion of the population which will contribute to the adoption of the framework.

Remember that gaining trust is the end goal. Today’s banking community needs to focus on offering a seamless experience while securing digital channels effectively to establish trust. This is key to successful adoption in this era of digital banking.

You can find out more about HID’s Open Banking insights in our eBook.

Edwardcher is a highly skilled digital security expert and avid technologist with an instinctive passion for finding pragmatic technologies to solve practical problems. He has over two decades worth of experience working in the trenches developing software and delivering solutions & services to the military, telecoms, banks, enterprise and the government with synergies in NFC, TSM and mobile financial services applied with PKI, risk management and strong authentication.