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Open banking allows consumers to share financial data securely with other authorised third-party companies. It also allows these companies to initiate actions, like payments, directly from your account with your consent.
It’s a shift from a closed system where the bank owns and controls all the data and services to an open ecosystem where the customer is in control.
Recent reports have claimed the government is considering exempting smaller lenders with under $5 billion of loans from the consumer data right (CDR), which would restrict the customers of these lenders from engaging with open banking.
According to The Australian Financial Review, 55 lenders would be exempt. This would leave 22 lenders remaining under the obligations.
Rehan D’Almeida, CEO of FinTech Australia, said the exemption of many regional banks and credit unions “poses a risk to the foundations of open banking.”
“The power of this pro-competition regime is its universality, which empowers consumers, drives innovation and preserves competition,” said D’Almeida.
“Creating carveouts is likely to create a two-speed system that forces reliance on less secure data-sharing methods, like screen scraping. Australians deserve a functional open banking system and there are promising signs the government is otherwise close to optimising the policy settings.”
FinTech Australia is “pushing back” against the proposal as it believes the exemption of small banks and credit unions would disadvantage consumers.
The Mortgage and Finance Association of Australia (MFAA) agreed that open banking must include all lenders; otherwise, it could risk a “wind back” of expansion.
“We are seeing open banking gaining real traction in home lending. Just over two months ago – through Frollo for Brokers – open banking became available to every single mortgage broker in Australia. It provides their customers with a safe and instant way to share and verify their financial data to access the right home loan,” said MFAA CEO Anja Pannek.
“Carving out dozens of smaller banks risks a two-speed regime, with customers of larger lenders able to safely share data through open banking and those with smaller lenders back to using screen-scraping.”
Open banking in Australia began in July 2019. Since then, adoption has been slow as it was implemented in phases.
However, according to The State of Open Banking Report 2025 from Frollo, adoption is growing.
Currently, 13 per cent of Aussie mortgage brokers are using Frollo’s open banking solution – double that of last year – and over 32,000 consumers used Frollo open banking with their mortgage broker in the last 12 months.
Further, the Australian Competition and Consumer Commission revealed 800,000 Australians had used open banking technology in the six months to July 2025, up 50 per cent from 530,000 consumers from the six months prior. This growth is helping change perceptions.
[Related: Open banking adoption growing but challenges remain]
