Former Westpac head of SME lending Tonia Berglund is the director of product at data aggregation and analytics platform Envestnet | Yodlee. She discusses the development of open banking and its advantages over screen scraping.
For more than 20 years, screen scraping has been the technical means of accessing consumer-permissioned financial data for financial service providers worldwide.
This process allows companies to gather their customers’ financial transaction data from a number of providers to form a comprehensive picture of a consumer’s financial position, to inform lending decisions or provide advice. Upon being granted access by the end consumer, these third-party companies log in to the providers’ consumer-facing interfaces on behalf of a financial institution’s customers and gather the required data from that website or source.
In recent years, the concept of open banking has been rapidly developing in Australia and around the world, driven by increased demand for consumer control, protection and transparency. Open banking involves organisations sharing their banking data with accredited third parties to help with broad-use cases such as improving lending decisions, tracking spending behaviours and comparing products and services. It relies on APIs (application programming interfaces), rather than screen scraping, which allow an application to interact seamlessly with systems designed for this purpose. This provides uniformly consistent and resilient access to data with reduced security and operational risks for all parties.
In August 2019, Australia passed the Consumer Data Right legislation, which gives consumers control of their data and enables them to freely grant and revoke access to accredited third parties.
This was initially only available to customers of Australia’s big four banks to share data relating to credit cards, debit cards and deposit accounts. The process of expanding this to home loans, personal loans and joint accounts began late last year and, as of July 2021, all non-major accredited deposit-taking institutions will be required to allow customers to share account and transaction data. These significant advancements are unlocking the potential for more types of financial service providers to benefit from open banking, and are allowing Australia to take major strides towards an open data economy.
Envestnet | Yodlee became just the eighth company and one of the first international intermediaries to receive CDR accreditation, joining the likes of Commonwealth Bank, Regional Australia Bank and Intuit. This is a testament to the commitment to enabling innovation in Australian financial services. CDR-compliant service providers, like Envestnet | Yodlee, can enable their customers to more easily achieve and maintain their accreditation under CDR by passing along solutions such as quality data and developer experience.
Open banking is far quicker than screen scraping as it establishes a direct connection rather than having to navigate a website
Advantages of open banking
Open banking promises a number of advantages over unregulated screen scraping. Perhaps most importantly, it is more secure and transparent in the way that consumers are able to grant and revoke access to their data without third parties needing to access their login details. Furthermore, it is far quicker than screen scraping as it establishes a direct connection rather than having to navigate a website.
While open banking is still in its infancy, companies like 86 400, a leading Australian neobank, are already using data aggregation capabilities to give their customers the ability to see all their accounts from over 100 financial institutions in one place. As a result, customers are able to see a full picture of their financial standing, use tools and services that deliver better lifestyle outcomes, and receive smart nudges and suggestions. As the open banking market continues to develop, more companies will be able to seamlessly integrate data from a number of sources, ultimately empowering consumers to take control of their lifestyle and finances.
Still a place for screen scraping
This open banking future is, however, still in its initial phases. There are a number of data sources, including some business, superannuation and investment accounts, that cannot be accessed as they are out of the scope of open banking. For any company that utilises these types of data, this drawback will delay a full switch to open banking and make a hybrid model seem far more appealing for the foreseeable future – until open finance makes its full debut.
While open banking promises a number of important benefits, the barriers to entry remain steep. Becoming CDR-accredited is currently a time-consuming and costly process – smaller firms and start-ups that want to put data at the core of their operations are expected to continue relying on secure and responsible forms of screen scraping until these barriers can be overcome.
With this in mind, the next one to two years are expected to see the open banking market mature significantly as financial institutions apply to become accredited data recipients and more legislation is passed to cover a wider range of data sources. Screen scraping will continue to be a relevant and useful technology for a broad range of complementary use cases; however, open banking is set to take centre stage as Australia continues its march towards an open data economy.