Commonwealth Bank of Australia developing tech for open banking

Commonwealth Bank of Australia is building a product stack to accommodate cross-institutional data sharing, a trend called open banking that has been slow to develop in Australia but has gained steam in Europe.

The bank is testing technology that allows customers to view balances from other financial institutions and connect to third-party apps under Australia's open banking law. To add financial services through its open banking strategy, CBA has made investments of about $38 million spread over the technology firms Little Birdie and Amber.

CBA has taken a 23% stake in Melbourne-based Little Birdie, a firm that helps consumers find deals and discounts when shopping online; and 25% in Amber Energy, a Cardiff, U.K.-based firm that offers a subscription service to make energy payments at wholesale prices.

Little Birdie allows CBA to offer a service similar to PayPal, which uses its acquisition of Honey to capture shoppers who are engaging with retailers before making a purchase to create stickier relationships. CBA views Cardiff as a good fit for its mortgage consumers, offering a way for homeowners to reduce utility bill expenses while automating payments.

The bank, which has 7.5 million digitally active consumers and more than 700,000 business clients, plans to use Little Birdie's technology as an add-on to CBA's own by now/pay later service and its partnership with the installment lender Klarna. CBA faces competition from Afterpay in the BNPL market, and sees access to special offers and price shopping as a differentiator.

Regulators are pressuring BNPL companies over concerns the product encourages consumers to take on too much debt. The Australian Parliament found BNPL financing is present in more than 20% of consumer insolvencies, compared to the 3% of insolvencies that include credit card debt. CBA did not return a request for comment by deadline.

CBA's open banking pilot comes about 10 months after Australia's Consumer Data Right went into effect, creating a PSD2-style standard that requires banks to allow consumers to access data from other banks, fintechs and third-party apps.

Australian open banking was slow to develop in Australia and was delayed several times. In the past year open banking has drawn more attention as firms such as the London-based fintech Railsbank build capabilities for data sharing as well as embedded finance, or the use of digital payment credentials and cross-industry partnerships to build a broad menu of financial services.