COVID-19 resets open banking “revolution”
While an open data regime promises to boost competition, there is one key part of the sector that retains the upper hand in open banking, at least for now.
As the shift towards open banking began in early 2018, the then Treasurer Scott Morrison said that the new rules would give consumers better control of their data, paving the way for more competition.
He even thought the regime could disrupt the big banks’ control over bank data.
“Open banking will revolutionise the financial services sector, completely transforming the way Australians interact with the banking system, by giving consumers the right to share their data with other banks, other institutions and innovative fintechs and get themselves a better deal,” he said at the time.
In a recent report on open banking, RFi Group data highlights several propositions that consumers would like from open banking.
Of the use cases open banking has the potential to unlock, consumers would likely use personalised advice and recommendations (56 per cent); followed by account aggregation (53 per cent) and fast-tracked credit product applications (53 per cent).
The data has also indicated that since 2019, consumers of all ages have become more comfortable using digital only providers.
The research to date certainty suggests that open data could indeed ‘revolutionise’ financial services but RFi Group data also suggests that for now, the big four banks still retain the upper hand in open banking at least for now.
Since the health pandemic unfolded, trust has emerged as an important factor for consumers.
The major banks are in a strong position. They should really reinforce their trust credentials that they forged with their customers and the wider community in response to COVID.
“One of the outcomes of COVID is that there has been a flight to safety and stability, and that actually benefits the major banks,” RFi Group managing director, consulting Alex Boorman said.
“To a certain extent COVID-19 might take some of the fuel away from the migration to digital-only banks because consumers right now are more comfortable doing banking with brands that they are both familiar with and can trust.” Boorman said.
Nevertheless, as the health pandemic “fades into distant memory” that might change and open banking has always been seen as long-term proposition.
To date the ‘ecosystem’ includes the four major banks as data holders with two accredited data recipients.
“Longer- term open banking has the potential to be hugely significant in the way in which consumers engage with banks” Boorman said.
But for now, he sees an immediate opportunity for the big four to better engage with their customers.
“The major banks are in a strong position. They should really reinforce their trust credentials that they forged with their customers and the wider community in response to COVID.
“This will help as the organisations that will benefit from open banking will be those that are the most trusted.”
Here addressing concerns around data will be key.
The RFi Group data showed that consumer’s three main questions about open banking included: how do I know my data is safe when I share it?; how do I control who has access to my data and what protections are there should my data be used for a purpose I haven’t consented to?
For Boorman, right now, it will not be about offering the best products or experiences or even the “cleverest widgets”.
“Trust comes before that. A business can have the best product in the world but if a consumer doesn’t trust your brand, they will not use your product.”