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This material is recommended for those who plan to register a company in Australia.

Recently,  the problems of "data slavery" in the financial sector and the creation of closed ecosystems by large banks have been discussed in Australia. Development of open universal interfaces (open API) and open banking (open banking) are offered as tools of the decision. How good are these tools?

Changes in Australian law

As part of an initiative to promote open banking in Australia, a law on the right to consumer data came into force last year. The introduction of a new consumer data law is one of the most important regulatory events of the latest period that is expected to increase competition in the Australian retail banking market.

Those wishing to start an Australian company and open an account with an Australian bank should keep in mind that the updated legislation is intended to unlock certain consumer data stored in banks so that bank clients can allow the transfer of this bank data to third parties.

Open Banking defined

The open banking model assumes the free receipt of data by the company from the provider bank, the main service is often the product of the company itself, which does not require a banking license (eg, scoring systems, robot consultant). The key aspect here is freedom of access, the right of the client, not the bank, to dispose of the accumulated information. Now the advantages of the largest players are based largely on the restriction of access to accumulated data. Overcoming barriers with the user's consent to the use of data will give access to information to small and medium-sized players, which will greatly encourage the development of competition in the industry.

The Australian approach

The approach to open banking and the exchange of customer data within a banking center in Australia is different from how Open Banking developed in the United Kingdom where it originated. UK regulators have thus tried to force banks to exchange customer data in order to encourage account transfers and third party competition.

The updated legal norm provides consumers with a basis for obtaining information about themselves and the banking products they use. It launches a mechanism that allows consumers to share information with their service providers, who then provide access to that information to other potential third-party service providers.

Those planning to register a business in Australia or start an Australian FinTech company should also take into account the fact that customer data can cover a wide range of banking products and will include, for example, mortgages and credit or debit cards.

The new legislation also allows consumers to disclose information to accredited persons for use, in accordance with the guarantees of confidentiality. Privacy standards include, but are not limited to, mandatory notification when collecting data, as well as open and transparent management of consumer data.

Thanks to the use of application software interfaces in data transmission, a seamless and open network of information will be available to new financiers, as well as those wishing to register a fintech company in Australia.

Banks will be required to provide consumers with access to product/consumer data for mortgage accounts and will make it mandatory to exchange data on credit and debit cards, as well as deposit and current accounts.

The nuances of open banking

The introduction of new principles and tools should serve as an incentive for the development of new products. In addition to scoring and financial management programs, these can be account and transaction management services; here the most obvious product is a mobile aggregator bank, which provides information about the customer's products in different banks in a single window and allows you to instantly make transfers between accounts. And this is a really long-awaited product. In this model, you can, for example, receive a salary on a card in bank A, pay with a card of bank B, which gives an increased cashback, and keep the deposit in bank B, where interest on the balance is accrued daily. Thanks to the mobile bank-aggregator the client will be able to use all the best at once in a single application.

Conclusions

Open access to data and transaction management will increase competition in the Australian financial industry, which will unfold not only in terms of rates and tariffs but also through the ease of use and sophisticated interfaces. This is the environment in which fintech companies can finally come to the fore, which are able to quickly create and market convenient applications, as well as quickly adapt to customer needs. And ordinary banks with their long chain of decisions will not be easy to compete with them.

For entrepreneurs intending to start a fintech business in Australia, the development of Open Banking can also be an incentive to innovate and upgrade an existing, customer-oriented service in the emerging financial services industry.

Legal assistance

If you are interested in registering a company in Australia, experienced IQ Decision specialists are ready to provide you with a wide range of services, such as legal assistance in obtaining a license for cryptocurrency activities, the advice in registering a payment system in Australia, and related documents.