Open Banking Could Be The Boost Australia’s Challenger Banks Need

October 10 2019

Money is pouring into Australia’s fintech sector as regulatory changes and digitally savvy consumers look set to open up the industry.

A new report from Pegasystems, a global software company built on decades of success with large American banks, suggests Open Banking in particular could be a breakout moment for Australia’s growing cohort of neobanks and fintechs.

Open Banking is set to to be fully rolled out in Australia by February next year, mandating that banks share customer data in a machine-readable way. The government and regulators expect the regime will enable easier switching and spur new financial services and competition.

For smaller players like fintechs and Australia’s growing group of neobanks the scheme will enable access to the consumer data they have long coveted.

A Pegasystems whitepaper — Open Banking, How Consumers, Innovators & Incumbents All Benefit — released this week, identifies one market in particular that, through Open Banking, could become a catalyst for wider change: loans.

“Take the question of whether a prospect is a good bet for a loan,” the report reads. “Having access to transactional data across all of a prospect’s financial services, as well as external link assessment, will allow for a more thorough and accurate determination, while also offering the chance to make loan approvals far more automated and seamless.”

Before Open Banking, Australia’s Big Four banks have enjoyed near exclusive access to that kind of loan data, and had no requirements to share it — at least not in an efficient way like the APIs Open Banking will require.

The incumbents have leveraged that advantage well, and currently handle over 80 per cent of Australian home loans. That is the market Australia’s neobanks need to crack in order to start making profit.

Last year, digital bank Up outlined its plan to do just that, arguing experience and innovation could pry away banking customers, even if the smaller bank couldn’t necessarily offer the lowest rates.

While Up’s success predates Open Banking, the scheme theoretically helps the neobank’s cause by both lowering barriers to switching and unlocking the data from Australian incumbents, according to the Pegasystems report.

Anthony Baum, CEO of online lender Tic:Toc, agrees that smaller players — and ultimately consumers — stand to benefit from Open Banking. In July Baum told Which-50 his platform was ready for Open Banking.

“It is in Australia’s interest to implement our Open Banking regime as fast and as holistically as possible … If we go fast we will have a great opportunity as a country to develop a whole series of fantastic fintech businesses,” Baum said.

Leveraging Open Banking is easier said than done. New banks have an agility advantage, but will need to overcome low consumer awareness and trust barriers. Meanwhile there is nothing stopping the Big Four from accessing the new data and, if they move quickly enough, further entrenching their positions.


Which-50. (2019, October 9). Open Banking could be the boost Australia's challenger banks need. Retrieved from