An open data regime is “just the beginning” of the wave of disruption set to hit Australian banks and open up opportunities for smaller FinTech players, Australian Bankers’ Association chief executive Anna Bligh said.
Speaking at the National Press Club on Wednesday afternoon, the former Queensland premier described the various technological changes that the banking sector is facing, singling out open data as the biggest on the horizon that will benefit consumers.
“Like so many other industries, banking is facing rapid and seismic forces of technological change that will mean that in just a few years banking could look very different than it does today,” Ms Bligh said.
An open banking regime would force banks to share product and customer data with their customers and other third parties with consent. It would allow Australians to get “the most appropriate and lowest cost” deals and can be used to “make their life easier”, Ms Bligh said.
The federal government flagged its intentions to implement an open banking regime in Australia in this year’s budget, and commissioned an independent review into the best way to do this earlier this week.
The review, which will be led by King & Wood Mallesons partner Scott Farrell, is expected to report back by the end of the year.
“Open banking will drive competition in financial services by changing the way Australians use, and benefit from, their data. This will deliver increased consumer choice and empower bank customers to seek out banking products that better suit their circumstances,” a Treasury spokesperson said.
Open banking has a number of benefits for Australian individuals and businesses, Ms Bligh said.
“Open data will mean customers can use the rich picture their financial transactions reveal to ensure they get the right mortgage or the right credit card that gives them what they need when they want it,” she said.
“It will also facilitate fast and easy switching between banks as customers can simply access all their recurring automatic payments and take them with them.”
Ms Bligh said Australian banks would welcome this new open data regime if a focus is placed on security and data safety.
“All good stuff, but it’s not hard to see the importance of getting it right to avoid serious security and privacy problems,” Ms Bligh said.
The government first flagged its intentions to force banks to open up their data with one small line in this year’s budget.
“The introduction of an open banking regime in 2018 will give customers greater access to their own data, empowering them to seek out better and cheaper services,” the budget read.
The Productivity Commission’s open data report, which was handed down in May, also recommended the development of an open banking standard in line with that in the UK.
This will provide huge opportunities for Australian FinTech startups, who have long been calling out for open data.
Tyro Payments executive director Jost Stollman said it would allow Australian tech firms to innovate and compete on the world stage.
“My view is the FinTechs and RegTechs are not going to scale up in Australia if they don’t get access to data. I have this view that there is the potential for Australia to leapfrog by going into the API economy,” Mr Stollmann previously told InnovationAus.com.
The major banks would allow FinTechs and RegTechs to innovate and let the best idea win. Attend the competition – don’t buy them or stifle them.”
The government’s movements in the space also have the backing of FinTech Australia CEO Danielle Szetho.
“The introduction of an open data regime in the financial sector will open up all kinds of innovation opportunities for the FinTech community,” Ms Szetho said.
The government’s independent inquiry is the next step towards an open banking regime in Australia, and it has also been backed by Australian Bankers’ Association director of industry policy Tony Pearson.
“Banks welcome the move to an open banking regime provided that customer security and privacy needs are paramount. The inquiry is a crucial step to identify and resolve the legal and technical challenges in open banking,” Mr Pearson said.
“We believe that designed properly, expanding data access will give customers valuable information to find better deals with their financial products and services. But it will take a shared effort between banks, government and FinTechs to address issues like ensuring customer privacy is protected, their data is secure and knowing what to do when something goes wrong.”
For Australians banks, open data is just the start of the wave of disruption that’s about to hit them, with Ms Bligh pointing towards a cashless society, cyber currency and peer-to-peer lending.
“All of these are disruptive. All can have both positive and negative outcomes for customers. All can play havoc with our strong and stable banking system. In times of major disruption, trust becomes an even more critical ingredient. As Australians and their banks navigate these radical changes, trust will be imperative to getting the mix right,” Ms Bligh said.
And if this technological change is properly implemented and regulated, Australia can be globally competitive, Ms Bligh said.
“In five years’ time, what I want to see is Australia’s banking sector leading the world, not just because it is strong, stable, safe and well-regulated…but because banks are ready for the future and customers have high levels of trust and confidence in banks to appropriately balance their interests with those of bank shareholders. Where it is self-evident that these things are indivisible,” she said.