The debate on Open Banking was often framed as a competition between banks, fintechs and wealth managers. But a more productive view might be to look at the new regime’s potential to create an innovative new financial sector “ecosystem.”
This was one of the consensus views at a recent seminar held by Australia’s Financial Services Council in Sydney. An expert panel discussed the advent of the new regime from July 1, 2019.
Australia’s Big Four banks – ANZ, NAB, CBA and Westpac – will be the first to make their data available to accredited third parties for product development under Open Data provisions, while consumers will be – theoretically – covered by the new Customer Data Right (CDR).
The U.K. has had Open Banking since 2016 and panel member Jamie Stevenson, the Global Head of Product Management, Data & Analytics at RBC Investor and Treasury Services, said the new regime had already had an impact on the way the U.K. financial sector looked at collaboration around product development.
“This is about a change in mindset for the financial sector to work out how, in this ecosystem, solutions can plug and play together, how they can survive and reposition themselves,” Stevenson said.
“Legacy organizations have to wake up quickly and work out how they want to participate and share data with a regtech or a credit organization because legacy organizations that participate have got to get used to the new approach to sharing data,” he added.
Michelle Lusty, the Head of Sonata Product for software provider Bravura, said that it was critical that the first use case examples for Open Banking should win the trust of consumers, otherwise it would “stymie the whole value add” of the new regime from the beginning.
“We focus too much on this whole idea of banks versus fintechs versus platforms, because everybody loses if consumers won’t trust businesses with their data,” Lusty said.
Wealth Managers to Benefit
Lisa Shutz, the founder and CEO of startup regtech company Verifier, believes that wealth management providers will be among the earliest beneficiaries of the new regime.
Wealth managers, she said, needed to understand the “overall financial picture” of customers, and much of that data currently resided with primary banks.
“This really is a strategic opportunity and it’s happening just in the nick of time for the financial sector,” said Shutz.
“A lot of the conversation is framed around banks versus fintechs, but I think that is missing the point: this is about the race to be relevant, and that is not necessarily competing with banking products but in gaining that holistic view.”
“If you want to see where the competition is going, I would look to them,” said Shutz.
“So this is really a strategic opportunity and just in the nick of time for the financial sector, because if you don’t collaboratively share data now, then it is just going to be more and more easy for the new platforms to be more relevant,” she added.
RBC’s Stevenson said that while digital technology was doing some “really amazing things” with data, its applications were currently either “somewhere between creepy and cool”, a comment which underlined the ongoing ethical dilemma around data use.
The Cambridge Analytica scandal, where the company used data from Facebook for political campaign purposes, was fresh in the minds of many consumers around the world.
Ethical Questions Arise
Taking up this theme, Melissa Ferrer, a partner in the Data & Analytics practice at Deloitte, said she had been working with many organizations whose focus was on improving their data management, and technology was only one part of this.
“Organizations are grappling less with the technical plumbing on how you move data around, and more on putting in place how they manage information more broadly,” said Ferrer. “Open banking will add some additional lenses on how information is shared across different types of organizations, and that is going to create new expectations around the way they treat their data.”
Lisa Schutz gave a current example of how, under pressure from the Royal Commission into Banking Misconduct, mortgage providers were spending more time “trawling through bank statements” of consumers.
“What are the ethics if they see that you regularly see a cancer specialist, or if you gamble? Is that of itself a problem? Should lenders be making moral judgments about spending patterns?” she queried.
Another of these issues, identified by the panel, was whether financial services providers would “discriminate” against consumers who “opted out” and did not provide them with data.
Part of the solution lay in building trust through the ethical use of data, and in educating consumers on how they were able to control the use of their own data.
“There are so many benefits to enabling the sharing as long as you control the use, and you can’t do one without the other,” said Schutz.