With Open Banking set to launch in Australia, this will see customers have greatly improved access to, and control over, their own data. In our report, in collaboration with Cuscal and King & Wood Mallesons, we explore why the customer should be at the core of any Open Banking-related strategy, the strategic opportunities it presents, the steps required to be compliant and the partnership potential for success.
Open Banking is the first step in what will inevitably be an ‘open data’ future – in which institutions and customers are all part of a safe, robust and innovative ‘data economy’.
Scott Farrell, Partner, King & Wood Mallesons, and leader of the Australian Government’s Review into Open Banking says: “Open Banking and the CDR will mean that banks will no longer be competing in the financial sector, they’ll also be competing in the emerging data sector.” The legislation will impact banks first, before energy, telecommunications and other customer-data heavy sectors, including a push from the productivity commission to apply the CDR to superannuation by 2021.
Open Banking means a customer of a bank – whether an individual or business – can request or give consent for their data to be shared with a safe and accredited third party such as (but not limited to) another bank, a product comparison site, fintech company or utility provider (such as a telco or energy company). It offers the potential for customers to have clearer visibility of their data as a whole, and to make more informed decisions based on the insights.
Ian Pollari, Partner, National Sector Leader, Banking & Co-Head, Global Fintech, KPMG, says whilst uncertainty around dimensions of Open Banking exist and will be resolved over the coming months, all banks in the market should be assessing their options and strategic approach – in terms of timing of their participation, identifying use cases, technology and operational readiness, partnerships, etc. – this will be critical for success. "We must learn the lessons of other jurisdictions, but chart our own course. This will require companies to move beyond seeing this as solely a compliance exercise, but also a strategic opportunity."
Bianca Bates, Chief Client Officer, Cuscal, says Open Banking is an acknowledgement that customers want choice, and want to get the best deal. “It is all focused on lifestyle simplification,” Bates says.
The move to Open Banking in Australia follows a number of jurisdictions globally – including the UK, parts of Europe and India. In each country, the change has either been driven by customer demand or legislation.
For example, in the UK, Open Banking has occurred in response to government reforms – largely as a disciplinary exercise following poor banking practices. In Europe it was designed to help provide greater access to payment services. In India it has evolved in an informal fashion as a consequence of a number of government initiatives and through the development of new products and services that respond to customer needs and increasing expectations, but without overarching Open Banking regulation. There are some fundamental differences intended for the Australian model, based on learning from the UK’s implementation challenges.
|Mandated compliance or voluntary||Mandated||Mandated|
|Limited providers or all banks||All ADIs||Nine banks|
|Access to read data only or also to write data||Read only||Read and write|
|One way or reciprocal obligations to share data||Reciprocal||One-way|
|Broad or more limited, account scope||Broad||More limited|
|Single tier or multiple tier accreditation||Multiple, risk-based tiering||Single tier|
|Clear and specific liability regime||Yes||No|
|Separate standard-setting body||Yes||Yes|
|Banking only or multiple sectors||Multiple sectors||Banking only|
Open Banking in Australia has a strong customer focus. The scene for customer-centricity is set by the four words on the front cover of the Australian Government’s Review into Open Banking: customers, choice, convenience and confidence.
Unlike the approach in other jurisdictions, the Australian approach is not purely about compliance, because Open Banking and the CDR is framed to put the customer at the core. It is part of the continuation of the real-time 24/7-journey that banking customers have been shifting to, facilitated via online, mobile and apps.
Incumbent banks may be concerned about the potential competitive threats that Open Banking could present. For example, making it easier for customers to compare and contrast products and services, switch banks, or for other banks to target their customers with tailored marketing material. However, Brett Watson, Partner, Payments Advisory, KPMG, says allowing concerns to get in the way of seizing the strategic opportunities offered by Open Banking could mean competitors surge ahead.
Open Banking presents new opportunities and risks for banks, and has implications across whole organisations. There are three focus areas key to being ready for compliance:
Open Banking will require banks to establish and drive value from collaboration and partnerships with the safe and accredited parties that are part of the ecosystem.
Banking is one of the industries leading the way into an open data future, so all eyes will be on how banks operate, what they do well, and importantly, how they please customers in the process. Hessel Verbeek, Partner, Strategy, KPMG, says banks need to think now about their internal operations, and their partnerships, to make the most of the opportunity. “Then you have the two wheels working together – success at an individual level and success at an ecosystem level.”
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