Customers never wake up and say: “I sure wish I had more open banking.”
Customers will be winners under open banking, writes FINSIA’s Lewis Panther although they may not directly recognise its benefits.
The customer never wakes up in the morning and says: “I sure wish I had more open banking.”
But they will be the real winners from the roll out of new industry-transforming regulations that will hand them the power to control their own data.
That’s the view of the Financial Data and Technology association chairman Gavin Littlejohn whose global membership organisation lobbies to give customers more control over their financial lives.
Whether it’s the new fintechs on the block or big banks adopting to the changes isn’t FDATA’s priority. It’s that end result for the customer outcomes that is vital.
As in a previous FINSIA article though there is a sense some of the fintechs may have been cut off at the pass and that the playing field hasn’t been levelled enough yet.
“If the big banks learn how to master the data, they have I would say they will be more competitive,” he said.
“I don't mean in a defensive position. I mean more competitive as in being able to more rapidly innovate in customer experience.
“As long as this is delivered on what you would call a level playing field then I think everybody should get on with it.
“If there's any hint that the large banks have actually taken some advantage in being able to get access to things before the rest of the market, that's unacceptable.”
UK-based Littlejohn acknowledged some banks have leveraged their financial clout but thinks fintechs will not be put off - whether they work with or compete against their rivals. But again, he says, the end result will be to give the customer the best possible deal.
He went on: “The banks have been, in some cases, partnered with fintechs. In some cases they've been acquiring them, and in other cases they've done a long drawn out courtship and then dumped them at the altar.
“During that courtship they've learned everything about how to operate.
The customer is never disconnected from the bank because they failed to re-authenticate on 90 days
“The agendas in both Australia and in the UK have been developed with competition in mind,” he said.
“Fintechs have been using the aggregated data in the unregulated space for a long time now.
“The problem was that the banks were constantly telling their customers that either the bank owned the customer's data, and not the customer, or that it was unsafe for the customer to share their data.
“We've been operating on a playing field that isn't level.
“Even if you look across to European regulation, the requirement for 90-day re-authentication where the customer must validate that they wish to maintain the connection between the bank and the third-party provider, between the bank role and the fintech.
“If that authentication doesn't take place the customer is disconnected from the fintech role. But the customer is never disconnected from the bank because they failed to re-authenticate on 90 days.
“Already the decks are stacked in favour of the bank.”
But Littlejohn is confident fintechs will succeed where they can offer betters deals without the need to go through a long-winded education about the Open Banking process.
“That is going to leave everybody a little bit cold,” he said.
“Whereas the fintech that's able to say to a customer: 'Come with me and we'll help you find a new mortgage in minutes rather than it taking you three weeks’ is going to very easily be able to explain to their customer what the value proposition is.
“The customer doesn't really need to know all the details. Simply by enabling the third-party provider to access the financial data, they're going to get access to more rapid, more accurate financial decisions.
“Better rates. Better deals. Less chance of being rejected for the application. Whichever way you'd want profits. There is a lot of advantage in here where the fintech is able to really compete with the incumbent market by offering more interesting models of decisioning.
“For fintechs, or indeed the banks in Fintech roles, there's a massive advantage in being able to know who your customers are when they're not with you.
“If you are missing one slice of their financial life, being able to make adequate decisions that look after the customer's needs is harder to pinpoint.
“We shouldn’t forget that if you are a regulated financial services business selling regulated products you have a duty of care to make sure the products that you sell are suitable for the customer.
“And thanks to that when you're missing swathes of the customer's financial data, it makes it very difficult for you therefore to have an online relationship distributing financial services.
This article was originally published in FINSIA’s InFinance publication.