In March 2025 the government announced a few key changes to open banking and CDR, set to take effect from mid-2026. Among the reforms are:
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Expand the CDR to include non-bank lending products.
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Remove the requirement for data holders to share consumer or product data for niche products such as asset finance, consumer leases, reverse mortgages, margin loans and foreign currency amounts.
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Reduce the period of data to be held and shared from seven years to two.
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Ensure buy now pay later (BNPL) products are covered by data sharing obligations.
"The government's changes will open opportunities for consumers to use the CDR to find the best deals on more lending products. It will also address the cost burden of the CDR on the financial sector," finance minister Stephen Jones said.
Open banking is a system that allows consumers to securely share their financial data with accredited third-party providers, called Accredited Data Recipients, facilitating more personalised and competitive financial services.
In Australia, this initiative is part of the broader Consumer Data Right (CDR) legislation, which aims to give consumers greater control over their data across various sectors, starting with banking.
Open banking officially kicked off in mid-2020, with major banks CBA, NAB, ANZ, and Westpac legislated to share data with each other for credit cards and savings account products. From there other institutions and use cases followed.
Open banking has the lofty ambition of putting consumers in the driver's seat when it comes to their data, eventually making it easier to do things like refinance their home loan and get better deals on their savings account.
While this is all well and good, how has open banking actually worked in the real world so far?
How to Make Use of Open Banking
If you've ever had to share login information or authorise 'screen scraping', you'll know that sharing data can be fraught with danger. Right now this is where open banking can come in most handy, removing the need for this by sharing data you control with Accredited Data Recipients.
Streamlined Loan Processes
Collaborations, such as that between the Commonwealth Bank and NextGen, have utilised open banking to expedite loan applications made through mortgage brokers, resulting in faster approvals and improved customer satisfaction.
In announcing the partnership in late 2023, research found less than 15% of all applications are approved without the need for additional information post-submission.
This results in an average 14-day waiting period for unconditional approval across the industry. By having customers' data right there without having to go back and forth, this could cut down on unconditional approval times dramatically.
Financial Aggregation Tools
Consumers can consolidate information from various financial institutions into a single platform, simplifying budgeting and financial planning. Consumers can use applications that aggregate data from multiple accounts, providing a comprehensive view of their financial status.
One such app is the Frollo money management app. Frollo, being one of the early fintech adopters of open banking, allows you to see all your finances in one app and glean financial insights with tools that making budgeting easier.
Find a Better Energy Deal
While not strictly banking-related, 'Open Energy' employs a similar concept to allow users to find better energy deals that are more tailored to their use. There are a couple of ways in which Open Energy is useful:
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Plan Comparison: Authorising your data to be shared with companies such as Accurassi allows you to get better energy deals, and even accounts for things like peak/off peak use, solar feed-in tariffs and more.
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Energy Optimisation: Companies such as Solar Analytics provides more timely feedback about how you are using your energy and offers ways to save. Smart monitors can allow you to see your use, but you often won't be motivated to cut back until your next bill arrives.
While not strictly Open Energy, the government's Energy Made Easy website also allows you to upload your bill and compare better plans for you.
Switch Savings Accounts Easily
While not exactly possible right now, it's in the roadmap. Being able to switch savings accounts easily involves what's called the Action Initiation part of open banking.
According to Frollo's State of Open Banking report in 2024, Action Initiation will be a game changer when third parties are allowed to action switching of savings accounts on a customer's behalf.
"Using Action Initiation, the customer could make the switch immediately after identifying a better product for them," the report read.
This could be an important development, especially considering a 2023 Deposit Inquiry by the ACCC found upwards of 7-in-10 customers do not meet deposit criteria to attain the top interest rate every month.
The Action Initiation step will allow customers to more easily find and switch their savings account to a product more suited to them. It's a slow rollout, and if you put yourself in the banks' shoes, you can see why.
What is an Accredited Data Recipient in Open Banking?
An Accredited Data Recipient (ADR) is a business or organisation that has been approved by the Australian Competition and Consumer Commission (ACCC) to receive and use consumer data under the Consumer Data Right (CDR) framework, including open banking.
To become an ADR, a company must meet stringent security, privacy, and compliance requirements set by the ACCC. This includes demonstrating robust data security measures and compliance with CDR Rules.
ADRs can only access consumer data with explicit consent from the individual or business. Consumers can choose what data they share, with whom, and for how long.
You can check if an organisation is an ADR using the Consumer Data Right website.
Types of Data ADRs Can Access
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Bank account details (balances, transaction history)
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Credit and debit card transactions
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Loan and mortgage details
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Savings and investment data
Who Can Be an ADR?
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Banks and financial institutions
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Fintech companies
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Comparison websites (such as InfoChoice - we're already an ADR.)
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Budgeting and personal finance apps
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Lenders and mortgage brokers
What's Holding Back the Progress of Open Banking?
While open banking in Australia presents significant opportunities for innovation and improved consumer services, its widespread adoption remains a work in progress. The slow uptake of open banking in Australia can largely be attributed to regulatory complexity, high costs, and accreditation barriers associated with the Consumer Data Right (CDR) framework.
Adoption and Popularity
By the end of 2023, only 0.31% of bank customers were using the CDR framework according to the Australian Banking Association. Additionally, over 50% of data-sharing arrangements were discontinued or lapsed during that year. Since 2018, the banking industry has invested approximately $1.5 billion into the CDR.
High Cost of Accreditation
Businesses seeking to become accredited data recipients (ADRs) must undergo a lengthy and expensive approval process. The accreditation costs, combined with compliance and data security requirements, can be prohibitive for smaller fintech firms that might otherwise drive innovation in the sector.
Due to the high cost and complexity of accreditation, the government is exploring tiered accreditation levels to encourage more businesses to participate in open banking. This would allow fintechs to access data without needing full ADR accreditation, making open banking adoption easier and more widespread.
Sluggish Incumbents
Large institutions didn't become large by giving power to the consumer. A large development in the roadmap of open banking would be Action Initiation allowing customers to easily share data to get a better deal on home loan refinances and switching savings accounts. Profitability could be at stake with big banks as they rely on consumer inaction.
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Right now the main benefit in the lending space seems to be in slashing approval times on home loan applications, but the customer still needs to go through the documentation hoops of refinancing in the first place.
While major banks are required to share data under open banking, many smaller financial institutions and lenders have yet to fully engage with the system due to the cost. The cost and effort required to integrate open banking APIs into existing systems have led some businesses to delay or avoid participation.
Regulatory Red Tape
The Consumer Data Right (CDR) is highly regulated, requiring businesses to comply with strict security, privacy, and operational standards. Many businesses find the regulatory burden too high, particularly compared to alternative methods like screen scraping (which remains widely used despite its security risks).
Low Consumer Awareness and Trust
Despite the benefits, many Australians are unaware of open banking or hesitant to share their financial data with third-party providers. In a world of rampant scams, and data breaches from major brands that Australians used to trust (Medibank and Optus to name a couple) you can see why skepticism of Open Banking is high.
Alternative Workarounds Exist
Many financial institutions and fintechs still rely on traditional data-sharing methods like screen scraping or direct customer input instead of adopting the CDR framework. These existing methods, while less secure, require less regulatory compliance and cost less to implement.
Does AI Make Open Banking Redundant?
Artificial Intelligence, or AI, is already streamlining financial processes like loan approvals and income verification, which can make it seem like open banking is becoming redundant.
However, open banking remains critical in the push to provide standardised, real-time, and regulated access to financial data. In many cases, the two technologies work together - AI can instead process and analyse data obtained through open banking, leading to faster, more accurate, and fairer lending decisions.
Loan Approvals
AI-powered underwriting models can assess creditworthiness in seconds by analysing vast datasets, including past repayment history, spending behavior, and even social and behavioral data. This can be provided via open banking.
Many fintech lenders already use machine learning models to classify and verify income sources, identify spending patterns, and detect fraudulent transactions. The upshot is that this significantly reduces approval times compared to traditional methods.
Income Verification
On the income verification side, AI-powered optical character recognition (OCR) can scan and extract key information from pay slips, tax returns, and bank statements, eliminating the need for manual data entry and potentially pickup any fraudulent documents.
This significantly reduces processing time and errors in mortgage and personal loan applications.
Chatbots and Customer Service
AI-powered chatbots can handle customer enquiries, gather necessary documents, and guide borrowers through the loan process 24/7. This can serve as a handy backup to traditional customer service, which has opening hours, and potential cultural or language barriers hindering the level of service provided.
Data Security
Accredited Data Recipients can securely access verified financial data from regulated sources, which open banking provides without the need for document uploads or manual verification.
Open banking gives users direct control over which data they share and with whom, compared to AI-based risk assessment models, which may rely on opaque algorithms. Further, there are many data concerns with AI, with many language-based, public services discouraging the input of personal information.
Originally written by Jason Bryce in 2019.
Image by Yura Fresh via Unsplash
