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How small businesses can bank on Australia’s Consumer Data Right

How small businesses can bank on Australia’s Consumer Data Right

06/14/2022
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By Lloyd Parata, A/NZ Country Manger, BankiFi

Around the world, more than 60 countries have adopted open banking in some way.  

Now Australia’s version of open banking – the Consumer Data Right (CDR) – is approaching a tipping point as it reaches its second birthday on 1 July 2022.  

And that means it’s time to change the conversation. 

Looking at open banking through the lens of use cases for SMBs, the economy's backbone

Mostly you will find CDR described in terms of consumers having choice, control and convenience and, in these still early days of adoption, it’s understandable that the language prioritises confidence.   

Nonetheless, to drive adoption, we need to emphasise what we can do with the data to deliver value-added solutions to customers.  

  • From the economy’s perspective, that means SMBs, because they are our backbone.  
  • From the banks’ perspective, that means shifting the conversation away from compliance towards competitive advantage.

Both of these conversations are right in BankiFi’s wheelhouse.

Banks have an increased awareness of CDR and a keen interest to help SMBs

There is an increasing desire on the part of Australia’s banks to explore CDR to help small business customers and to be more competitive in the banking market.  

By comparison, a year ago, banks were more inclined to question the foundations of data sharing, whereas now they are curious to investigate its possibilities.  

Here are the three key questions that business bankers have about CDR:

  1. What does open banking look like in Australia?

  2. What data is available and how can my bank use it to benefit customers?

  3. How does the “consumer” data right also help businesses

What does open banking look like in Australia?

The best way to get a snapshot of open banking in Australia is to visit the Australian Government’s official website – cdr.gov.au.

For some context, compared with international regimes, Australia’s CDR is an economy-wide data sharing regime that currently read-only and is starting in banking before moving out to energy and telecommunications.

The CDR is regulator-led, rather than market-led, and the lead regulator is the Australian Competition and Consumer Commission (ACCC).  The ACCC approves banks who supply data as Data Holders (DHs) and parties who receive data as Accredited Data Recipients (ADRs). 

At present, all of Australia’s banks are required to make banking data available into the open banking ecosystem via secure APIs which can be accessed by the ADRs.

At the time of writing, more than 90% of Australia’s bank accounts are included in the CDR via the 113 active data holder brands that are actively sharing data.  Uptime and response time are overall very good although there are some early underperformers that are bringing down the averages displayed on the official performance dashboard 

There are 19 active ADRs and an additional 12 who are accredited but not yet active.

What this means is that there is a working ecosystem for open banking in Australia that has handled over 30 million open banking API calls to date.  

Open banking in Australia is now at the point where early adoption - for use cases such as account aggregation and cash flow insights - is being extended into higher margin territory like loan applications.

From the point of view of Australia’s 2.3 million small businesses, this is good news.

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What data is available...

Part of the changing conversation is that Australia’s banks are looking at CDR as a competitive advantage rather than a compliance burden.  

To understand this better, it’s helpful to understand the data that is available under the CDR and to note that it is available in real-time via secure APIs with consent.

The following data points can be obtained via CDR and then they can be run through an algorithm to generate insights:

  • Transaction information – transaction ID, date and time, type, status, amount, description
  • Account information – account type, account status, product category, verification whether the account is owned by the authorised customer, BSB and account number, nickname
  • Balance information – real-time balance, available funds, status (pending / posted)

Stringent Consumer Data Standards (the CDS guidelines) have been developed by the Australian Government to ensure that CDR gives Australians much greater control over their data than, for example, insecure web access via screen scraping. These guidelines cover general standards, security profiles, consumer experience, banking, admin and common APIs, schemas, known issues and non-functional requirements.  

From a bank’s perspective, CDR enables value-added services for SMB customers such as:

  • Account aggregation
  • Open cash flow management
  • Improved payments experiences 
    • Fewer failed payments and other exceptions
  • Faster transaction matching and reconciliation of invoices
  • Proactive identification of lending opportunities 
  • Nudging for financial health
  • Monitoring for stress indicators

... and how can banks use it as a competitive advantage?

For banks, it’s hard to productise what the average SMB customer needs ... what exactly does “average” look like anyway?  After all, a plumber, a coffee shop, and a bookkeeper have very different business models and financial requirements. 

Facilitated by technology, there is a long list of challengers lining up to offer financial services to SMBs who are underserved by banks.  Small business banking is the new battlefront for the banks and fintechs. 

Competition is ramping up as those challengers embrace CDR, embedded finance and partnerships to accelerate growth.   

Many businesses pay to use an accounting package that scrapes their bank statement data.  What if instead of the bank data flowing to the accounting package, the bank could build more value-added services into the banking channel?  Even better, what if those services were built around business workflows?  

This is the opportunity – and competitive advantage - that BankiFi enables.  It’s the opportunity for banks is to provide SMBs with so much more than credit; to provide holistic financial solutions to get paid faster, to settle up seamlessly with suppliers, manage cash flow and integrate with bookkeeping. 

BankiFi knows from our existing in-market experience in the UK with The Co-operative Bank and TSB that your SMB customers love being able to do more with one single interface.  

In fact BankiFi’s products are already set up to harness precisely these opportunities enabled by open banking and our purpose-built, white-label technology platform.

Isn’t it the “consumer’s” data right … how can CDR help businesses?

Australia’s “consumer” data right regime includes business bank accounts, so the name is a bit of a misnomer.  

The CDR has rolled out in stages, and, from 1 November 2021, business customers of major banks have been able to share data and from 1 November 2022 this will apply to non-major banks too.   

So Australian businesses can absolutely bank on Australia’s CDR.  

And by working with BankiFi, Australia’s banks can provide a set of integrated and value-added services to SMB banking customers – such as accounting, invoicing and payments – all designed around the processes that those SMB customers use to run their businesses. 

BankiFi equips banks to become customer centric, rather than product centric - increasing revenues and reducing costs, while allowing small and medium-sized business customers to thrive.

If you are an Australian bank interested to know more about BankiFi’s open banking enabled solutions for small business banking, please reach out using the contact form on the BankiFi website.

About Lloyd Parata | A/NZ Country Manager

Lloyd Parata brings more than 25-years experience selling enterprise software solutions into the Financial Services sector. Lloyd’s focus is helping clients with their digital transformation journey to improve operational efficiency, drive revenue growth and improve the customer experience.

lloyd.parata@bankifi.com

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