Having already gained traction in the international market, open banking is now on the rise in Australia and despite being in the early stages of adoption, it’s already showing promising signs of growth. In fact, the open banking market in Australia is expected to reach $1 billion by 2024.
One of the key benefits of open banking is the potential for innovation in the financial industry. With access to banking data, third-party providers can develop new products and services that better meet the needs of their customers. In Europe and the UK, open banking has already led to the development of new payment services, such as account-to-account payments and digital wallets, and the growth of personal finance management apps.
In Australia, the potential for innovation in the financial industry is significant. With the Consumer Data Right (CDR) set to expand to other sectors, it’s likely that we’ll see the development of new services and products that could lead to the growth of new fintech companies and a more competitive landscape in the financial industry.
So what should companies expect from the open banking sphere this year?
Open banking insights for 2023
- New financial services will pop up quickly
This year, we expect to see the emergence of even more new financial services, particularly in the payment sector. For example, the use of account-to-account payments has grown significantly in Europe, with active users in the UK in Q3 2021 hitting six million. On top of this, mobile payment services such as Google Pay and Apple Pay have integrated open banking APIs to provide more streamlined payment experiences.
- Third-party providers will rapidly grow
As seen in the UK and across Europe—who are proving to be the leaders in the industry—open banking will lead to the rapid growth of third-party providers in the financial industry. Currently in Europe, there are around 500 regulated open banking providers, while in the UK there are 234 third party providers (TPPs) and 93 account providers (banks and building societies).
- There will be a huge increase in innovative competition
With the growth of open banking will come increased competition and innovation in the financial industry. Today, there are over 295 regulated banks and financial service providers that offer open banking APIs in the UK, compared to just four in 2018. This has led to the growth of challenger banks such as Tink, Monzo and Revolut, which offer innovative financial services and products to customers. Australia won’t be far behind when it comes to forward-thinking, modern-day companies.
- Security will be a number one priority
With the sharing of sensitive financial data through open banking APIs, there has been a strong emphasis on security in the industry. The GDPR in Europe and the CDR in Australia provide a framework for data protection, and the EBA has developed guidelines for the secure implementation of open banking. In the UK, the OBIE has implemented a robust security framework, and all open banking providers are subject to regular security assessments. In Australia, the CDR will hold companies to a high standard when it comes to the security of consumer data and finances.
These open banking insights demonstrate the significant potential for growth and innovation in the Australian financial industry, and as open banking continues to expand in Australia, it will be interesting to see what new opportunities and challenges emerge for consumers and businesses alike.
Want to learn more about open banking? Read our article on why it's beneficial for both businesses and consumers.