As far as revolutions go, it started with a whimper rather than a bang. But that doesn’t mean that over time it won’t change the world.
July 1 was the date on which Australia’s Open Banking regime formally arrived, the first day of the CDR or Consumer Data Right which allows customers to share their banking data with their bank’s competitors and new fintechs.
That might sound big, but right now only two fintech companies have been accredited by Australia’s competition watchdog to have access to customer data held by the ‘Big Four’ banks of Westpac, ANZ, NAB and CBA.
Here’s how it works. The Australian Competition and Consumer Commission (ACCC) has provided the CDR platform which underpins the security and privacy protections, and which enables consumers to control which of their data held by one of the Big Four can be shared, with how and for what reason.
If that is underwhelming don’t tell Frollo’s Gareth Gumbley, who told local media he was “delighted, ecstatic, jumping for joy” as data flowed into the financial management dashboard he had worked on and tested with the ‘Big Four.’
Customer convenience is the winner so far
Frollo itself is not a competitor to the ‘Big Four’, and offers what is a complementary service.
It promotes itself as a free-to-use personal finance and budgeting tool which allows users to securely link all their financial data together — such as savings accounts, credit cards, car leases, mortgages and investment — to deliver a form of wealth tracking.
Soon, it will add a comparison tool so that customers can compare their bank’s existing products with others which might be more attractive.
So, a look at the Frollo business model is a case in point for open banking and data sharing, as the whole idea would be impossible without it.
The other accredited provider, Regional Australia Bank, is actually competing with the ‘Big Four’, as its first transaction under open banking illustrates.
The customer owned bank received an online application for a personal loan, and instead of painstakingly filling in all the questions which lead to a credit decision, the applicant was able to securely share over 3000 transactions — with a range of providers — with the lender in a matter of seconds.
This was done using technology provided by fintech company Basiq, which categorized the applicant’s spend into categories such as “recreation” or “transport”, allowing the bank to make a decision based on a clear understanding of the applicant’s financial position.
Both of these examples would seem to deliver clear advantages to the consumer, and come as the result of innovation. But there are some caveats.
Fintechs, don’t celebrate yet
While saying that open banking “cannot come soon enough”, Yanir Yakutiel — founder of alternative business lender Lumi — says it is wrong to see it as a “panacea” for fintechs to compete with the big banks.
There are still regulatory changes, he says, which are needed “before we can truly say we are on a level playing field competing with banks and other overseas competition.”
One of these changes is around data ownership, specifically for business customers.
“While we can access more data now than ever, ultimately it still belongs to the bank,” Yanir says.
“This is a curious state of affairs, as the business customers themselves are generating the data, the bank is merely collating and storing it,” he adds.
“Creating a policy where businesses own their data, and can share it how and when they please, is the only real method of making sure bigger competitors don’t leverage data driven advantages against smaller rivals, killing innovators and challenges to their lucrative status quo before they get off the ground.”
Waiting in line for accreditation
To Yani’s point, there are companies among the 39 fintechs currently waiting for accreditation who can solve this issue.
Verifier, for example, was one of the testers for the open data technology and has a business model which takes data — belonging either to a person or business — aggregates it and stores it.
Verifier customers then allow corporates — initially financial services firms but ultimately other service providers like utility companies and telcos — access to their data.
So while it might be a slow start for open banking, there is more to come.
From November, the range of products will be expanding to include mortgages, personal loans and joint account data. Non-major banks will also allow their customers to share their data.
By that time, some of the 39 waiting fintechs may have been accredited, and may be offering service in the market.
Australia has recently signed a fintech co-operation agreement with the U.K. — perhaps the first post Brexit deal — and some of those U.K. fintechs may be curious about the Australian market.
In time, perhaps more people — beyond Frollo’s Gareth Gumbley — will get excited about open banking. And some of them, eventually, might even be customers.
Now wouldn’t that be a revolution to shout about?