How open banking will transform the subscription economy

  • By Carolyn Breeze

As a self-confessed payments enthusiast, GoCardless’ Carolyn Breeze sees the potential for innovation in open banking to drive a subscription fuelled-economy, underpinned by emerging consumer behaviours.

Visualise a world where you walk into an office, a hotel, or your home, and every device in that room lights up.

Imagine you are automatically charged based on your usage of those devices.

Picture a paperless, frictionless society where you are recommended relevant services and products in the moment of need.

Imagine greater financial control, transparency and savings by forming better personal financial habits. Envision travelling without a passport or documents.

The only way that an assisted living world like that exists is if, in the background, our financial information is being shared securely.

With a far-reaching open banking scheme on Australia’s horizon, this reality might be closer than you think.

 Securely accessible consumer transaction data is helping companies provide consumers with better financial offerings worldwide.

Open banking enabled account data can help marketers better understand and serve their customers, offering them products and services that are immediately relevant and even needed.

Open banking has a multitude of use cases.

Some, like digital passports, are already underway, while others are still in their early stages.

By leveraging secure account data sharing between licensed service providers, companies using open banking can truly help improve their consumer life quality.

 The beginning of July saw Australia’s first application of the Consumer Data Right (CDR) pilot.

While it’s expected to be a ‘slow burn’ with consumers, the initial aim of the pilot is to reduce what’s known as ‘consumer stickiness’ in the banking sector, breaking up the big four’s market share.

The scheme aims to boost competition within financial services and explicitly offer consumers more choice.

Additionally, open banking will turbocharge innovation, as more organisations race to gain a competitive edge.

For payments enthusiasts like myself, this transformative potential is exciting.

The technologies expected to arise from open banking will build on emerging consumer behaviours to bring about new payment landscapes, like a subscription fuelled-economy, and significantly change the role of digital-assistance in our everyday lives.

Macrotrends and micropayments

Remember the Reebok Pump?

Those high-top, clunky sneakers that are now cool again? To give you an idea of the speed of digital transformation, let me tell you a story.

When I was 11, I wanted nothing more than a brand-new pair of Reebok Pumps.

It took me weeks to convince my mum exactly why I needed them, and eventually, she ordered them from overseas via a local retailer.

Four weeks later, they arrived, and my desperate wanting had already reduced to a general interest.

 I was reminiscing over the Reebok Pump with my husband, and it sparked my daughter’s interest.

By the time I had finished explaining to her just how cool they were in the 90s, she had found a pair online from an Australian retailer, added them to her cart via a mobile shopping app, and was complaining that the store didn’t offer four-hour delivery.

Our contrasting experiences show that in just twenty years, the speed, context and ease of payments has been revolutionised; and in more ways than one.

Nowadays, consumers are increasingly drawn to subscription services, like Netflix, Spotify, Airbnb and HelloFresh, for greater access, personalisation and convenience.

In Australia, 70 per cent of the population use subscriptions.

All of these behaviours edge towards a financial macrotrend; frictionless experiences via automated, invisible, safe and user-friendly payment methods.

Consumers are gravitating towards usership versus ownership, and this is reflected in every aspect of their daily lives.

Part of the appeal is attributed to a growing discontent with ownership, long-term debt and waste.

This feeds into a growing apathy towards lock-in contracts and large upfront payments; we now want the freedom to pay-as-we-go in instalments, otherwise known as ‘micropayments.’

Only 41 per cent of millennials own a credit card, compared with two-thirds of older generations.

As an alternative to long-term debt, 1.95 million Australians are now using buy-now-later options like Afterpay.

As phones, tablets and digital wallets get smarter, our payment methods are evolving too.

The Reserve Bank of Australia’s latest Consumer Payment Behaviour survey shows that in 2007, cash was used for 69 per cent of all transactions, while last year it accounted for just 27 per cent.

Over 50 per cent of Australian businesses prefer bank debit over credit cards as a way to collect payments.

Additionally, mobile payments now make up 31 per cent of all retail e-commerce, and this is set to grow 15 per cent over the next four years.

Even Commonwealth Bank has predicted Australia could become a cashless society by 2026.

All of these behaviours edge towards a financial macrotrend; frictionless experiences via automated, invisible, safe and user-friendly payment methods.

Open banking for open opportunities

Consumer behaviour is driving demand for more contextual, cashless and intuitive payments, and open banking is the bridge to that future.

In the same way that we use the cloud, I envision a future where our financial information travels with us securely from device to device, and across different platforms; enabled by APIs that seamlessly interact behind the scenes.

For this to become a reality, we need to walk before we run.

Trialling a CDR to ensure every Australian’s financial information is tokenised and vaulted is a smart move, and one that will enable future multilingual APIs both locally, and across borders.

Thinking back to the speed of digital transformation since my Reebok Pump days, an even faster and more accessible future is well within reach, and Australia’s open banking plan is just the beginning.

Carolyn Breeze, ANZ General Manager at recurring payments platform, GoCardless