Australia is on the cusp of adopting an open banking regime which will see the nation’s biggest financial institutions take a revolutionary step towards giving customers access to their data and therefore allowing third parties to access that data on their behalf.
This will arguably set in motion a new open data sharing economy, where first financial services and later other industries will become more personalised and competitive than ever. Ultimately, giving even greater control back to the consumer.
Australia will follow UK, Europe and Japan when introducing open banking, and will have an opportunity to become leaders in this field as it marks the first installment of consumer rights within the Australian banking industry. Open banking will go live 1 February 2020 for all ‘major banks’ with remaining banks to follow in the subsequent 12 months.
Alex Scandurra, CEO of Australasia’s leading fintech hub Stone & Chalk, says, “Open banking is an incredible opportunity for Australia to place the consumer back in the center by empowering them through choice. It’s a positive shift towards a more transparent economy, one that has room for innovation in creating a better tomorrow.”
Joanne Cooper, Founder and Managing Director of ID Exchange based at Stone & Chalk, who is creating privacy enhancing technology, states: “Every individual is the rightful custodian and owner of their own personal data. We each need to become our own Chief Information Officer to effectively start controlling how and to whom we provide access to our data.”
“Open banking provides an opportunity for businesses’ and individuals’ to build trust and value. To date, we have taken for granted what our personal data is worth and have given away more of our rights than we are aware of.”
How will open banking affect Australian consumers?
Open banking can be viewed through the lens of transferring ownership of data back to the consumer and therefore giving the individual an opportunity to unlock potential benefits by interacting with third parties.
In February 2018, we saw the final report of the Australian Open Banking Review led by Scott Farrell from King & Wood Mallesons published with more than 50 recommendations about the regulatory framework which open banking could operate, as well as the necessary legislation.
The Report highlighted four simple principles that open banking should be:
- Encourage competition
- Create opportunities
- Be efficient and fair, with security and privacy at the forefront
Ultimately, open banking will shed light on a range of financial areas involving data ownership, data access, governance, licensing, privacy, security, legislation and collaboration.
What about data consent?
In May 2018, the EU established General Data Protection Regulation (GDPR) in a sweeping effort to harmonise data privacy laws, rolling out hefty fines for those in serious breach of data protection.
Katryna Dow, CEO and Founder of Meeco, based at leading fintech incubator Stone & Chalk, a startup creating technology to power data consent explains, “GDPR offers consent and control, but it doesn’t ascribe ownership. As for any asset class, the person that controls the asset derives the value.”
In the open banking context, this could mean better access to products, loyalty, personalisation, priority or financial benefit. Dow explains, “In order for consumers to secure real data control, banks will need to position their strategy to enable customers to be intrinsically part of the value chain.”
Paul McCarney, Co-Founder of Data Republic, explains, “Ultimately, what we (Data Republic) govern, and what the open banking framework governs, is better use of data.”
“The world’s moving towards more of an open-data economy. So, as data becomes more open and is shared at scale, you’re going to have more risk which needs to be managed […] In a properly governed open data economy, I think we’re going to have more perfect information to make better decisions, which will mean better services for consumers, and less volatility in the markets. It’ll likely bring cheaper services over time,” McCarney explains.
In 2013, McKinsey Global Institute reported that open data can help unlock US$3 to $5 trillion in economic value annually across seven sectors.
It’s clear that open banking will open up opportunities for fintechs to help third parties with managing data, privacy and consent.
Joanne Cooper says that a platform which makes it easier for businesses’ to assure compliance whilst giving consumers control over their personal data will give consumers confidence to participate in the data-sharing economy.
“It’s up to businesses’ to use open banking to compete for customers by offering them higher value services in exchange for access to their data. The technology exists today to do so securely. There’s no excuse for any business to be left behind when open banking hits.”
How will open banking be regulated in Australia?
There are of course a number of legal concerns attached to open banking involving accreditation, privacy and confidentiality, informed consent, liability, reciprocity, contracts, customer uptake and sandboxing.
However, despite the long road ahead, open banking redefines the importance of data in the way it can be harvested and shared to create consumer-centric technology tailored to the user-experience, providing more choices for the consumer.
Sufficient regulation will be key in allowing fintechs to create solutions and work hand in hand with legislators and policy makers to craft optimal outcomes.
This year alone, we’ve seen many changes to Australian legislation like the establishment of the Notifiable Data Breaches (NDB) scheme in February 2018 to include all agencies and organisations with existing personal information to have security obligations under the Privacy Act 1988 (Cwlth).
The NDB scheme introduced a strict requirement to notify individuals whose personal information is involved in a data breach that is likely to cause serious harm, including recommendations about steps individuals should take in response. In May this year shortly after the EU rolled out GDPR, the Australian government announced the introduction of the Consumer Data Right (CDR) to underpin open banking, formally recognising customers’ ownership of their data.
Overall, the Consumer Data Right will allow customers to share their transaction, usage and product data with service competitors and comparison services, if they choose to do so.
Over the next four years, the Australian Competition & Consumer Commission (ACCC) will oversee the introduction of a general data right for all consumers to ensure its successful implementation.
More Australian legislation governing open banking is expected to follow to ensure data exchange between banks and recipients is carried out in a safe, controlled environment and ultimately minimising the risk factor.
Looking ahead, partnerships will be critical, as banks may require assistance from #fintech companies in niche areas such as Identity Management in order to access the latest technology and offer their customers the best financial outcomes and security measures possible.
#Openbanking presents a huge opportunity for Australia in being able to raise productivity, improve new products and services and usher in a new open data economy which will ultimately give power and control back to the consumer.
With these and the many other changes occurring globally the new source of competitive advantage has already begun to shift towards an ‘outside-in’ approach to innovation. That is, organisations that are able to attract the best quality ventures ahead of their peers will be able to stay ahead of the curve.
Stone & Chalk run several innovation programs between corporates and high growth potential #startups and #scaleups throughout the year. If you’re interested in learning more about how to tap into this #innovative way of working feel to contact Mary Ramsay Stone & Chalk’s Head of Innovation Programs.