Countdown Update

By Lachlan Colquhoun  

Australia’s financial industry is preparing for the beginning of the new Open Banking regime which is set to begin on July 1, 2019. At a recent event in the FSC’s Technical Workshop Series, an expert panel discussed legislative and industry readiness for the changes. Moderated by Janelle McQueen-Paice, National Manager, Customer Experience & Channel Development at BT Financial Group, the panel also addressed some of the wider implications of Open Banking on the financial sector.

The debate on Open Banking was often framed as a competition between banks, fintechs and wealth managers, but a more productive view was to look at the new regime’s potential to create an innovative new financial sector 'eco-system.'

This was one of the consensus views to emerge from the FSC’s expert panel as they discussed the advent of Open Banking, to be enabled by the regime of Open Data and the new Customer Data Right (CDR) which gives consumers the right to access their data held by businesses.

The UK 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 UK 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 eco-system, solutions can plug and play together, how they can survive and reposition themselves,” Stevenson said.

“Legacy organisations have to wake up quickly and work out how they want to participate and share data with a regtech or a credit organisation, because legacy organisations that participate have got to get used to the new approach to sharing data.”

Michelle Lusty, the Head of Sonata Product for software provider Bravura, said that it was critical that the first user case examples flowing from Open Banking should win the trust of consumers, otherwise it would “stymie the whole value add” of the new regime at the outset.

“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.

In Australia, the Big Four banks will be the first to be required to make their data available to third party data recipients certified by the ACCC, and Lisa Schutz, the founder and CEO of start-up regtech company Verifier, believes that wealth management providers will be among the earliest beneficiaries.

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 Schutz.

“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.”

Another point “missing in the conversation”, said Schutz, was a discussion on how platforms such as Paypal, Facebook and Alibaba might participate in the financial industry in the future.

“If you want to see where the competition is going, I would look to them,” said Schutz.

“So this is a really 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.”

Another theme of the panel was set by Jamie Stevenson, who 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.

Taking up this theme, Melissa Ferrer, a partner in the Data & Analytics practice at Deloitte, said she had been working with many organisations whose focus was on improving their data management, and technology was only one part of this.

“Organisations are grapping 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 organisations, 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,” said Schutz.

“Should lenders be making morality judgements about spending patterns?”

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 Lisa Schutz.

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