'Vibe-session': Why open banking has never been more important

My mum and dad, who were recent immigrants from Eastern Europe, wanted nothing more than to provide a roof over the heads of my sister and me. As interest rates nudged 17 per cent, my parents worked multiple low-paying jobs to meet their mortgage payments each month, in order to keep the family home. It was a grim period, filled with anxiety.

These stirring flashbacks remind me now of the current state of the economy and financial pressures that many Australians are facing.

In June, WeMoney surveyed 1317 Australians about their financial wellness and the state of the economy and almost 60 per cent (58.8) said they thought Australia was currently in a recession.

While we're on the brink of recession according to GDP data, we're not officially there yet, so it might be fair to say right now, our economy is one of the "haves and the have-nots" or what's called a "vibe-session".

The bottom line is many average Australians are struggling to meet their financial commitments and balance the weekly family budget. The federal government acknowledged the pain many are feeling in the last budget and responded with a $300 energy handout to almost every household in the country.

Yet, there are other ways the government can ease the financial burden on Australians, and one area within their power is that of the cost of financial products.

We know from our own research that up to 85 per cent of Australians are overpaying on credit products like their mortgages and personal loans. The ACCC found consumers are also missing out on earning higher interest rates on retail deposit products, with one cause being the perceived or real difficulties associated with switching accounts.

The Consumer Data Right (CDR) or open-banking regime was introduced to address these very issues five years ago on July 1, 2019. At the time, the ambition was to make it easier for consumers to switch banks by safely sharing their financial data with trusted third parties, like a rival lender.

CDR was (and still is) touted as a game changer and it was suggested the impact of open banking for consumers would be like that of the portability legislation introduced to the telecommunications sector in 2001, which allowed mobile customers to easily switch providers, while keeping their existing phone numbers.

Since 2019, the CDR rollout has been patchy. Legislation which would enable consumers to initiate payments has stalled in the federal government. Recommendations from the ACCC that could improve the uptake and functionality of CDR, including an expansion of CDR which would allow bank customers to share their personal data with third parties to find better deals, are yet to be implemented.

As one of the largest aggregators of CDR data in Australia, I believe there has never been a more important time than now to leverage the improving capabilities of open banking to assist Australians with cost-of-living pressures.

These are some of the immediate steps that could be taken to get the rollout of CDR back on track.

First, the fintech and open-banking sector needs clarity from the government on the rollout of CDR. With CDR legislation stalled, and the implementation of CDR for non-bank lending, insurance, telecommunications and superannuation paused, there's currently a pervasive level of uncertainty which is impacting further research, development and investment. We're calling on all parliamentarians to urgently give the open-banking sector more certainty on the future implementation of CDR.

Another issue facing the roll-out of open banking is the lack of wider consumer awareness. In a recent survey, respondents were asked if they had heard of open banking. Almost 80 per cent (78) said 'no', which indicates a broader campaign is required to educate consumers and drive increased take-up of CDR products.

Lastly, around 35 per cent of consumers experience issues in the onboarding process and fail to connect their accounts due to a clunky and often confusing process - we need to streamline this process urgently to instill confidence as the CDR continues to scale.

Open banking can be a great equaliser for hard working Australians gripped by seemingly unabating cost-of-living pressures. Australia can become a world leader in CDR, but we're at risk of missing that opportunity without action.

Australia, the time for that action is now.