There is one key advantage banks still have in a data-sharing world based on recent experiences in the United Kingdom. Europe and the United Kingdom are already moving to an environment of open banking, paving the way for the sharing of bank data with third parties.
It’s move that is set to be mirrored in Australia following the government’s announcement in last week's budget. The government’s decision is aimed at boosting competition in the banking sector, a policy initiative that has already garnered the support of the fintech community.
But just as there are opportunities from open banking, a number of issues remain including concerns around privacy. This is an area where the banks will have the advantage, particularly in the area of consumer consent and trust.
Lack of trust was one of the key issues addressed by the Productivity Commission in its final report on data availability and use, released last week. In its report, it found that the “lack of trust and numerous barriers to sharing and releasing data are stymieing the use and value of Australia’s data”.
Genuine safeguards, meaningful transparency
While the commission acknowledged concerns around privacy, it noted that “the incremental costs associated with more open data access and use - including possible impacts on individuals’ privacy and willingness to share data - are expected to be minimal, but they will exist”.
The report added that “greater use of Australia’s data can coexist with the management of these risks, including genuine safeguards and meaningful transparency to maintain community trust and confidence”.
Research indertaken by RFi Group based on the UK experience, however, found that trust around data sharing was still an issue for consumers.
In the report, which included a survey of 20,000 consumers across 10 key markets, consumers were asked whether they were ready to give their consent to share data. According to the research, almost 60 per cent of UK consumers agreed that their privacy was more important to them than accessing better products and services. In fact, even among millennials, 41 per cent would rather maintain their privacy than be offered improved services.
“Here the banks have an advantage; on any given Sunday a consumer trusts their bank to hold and maintain the privacy and security of their personal information better than any other organisation,” RFi Group managing director of consulting Alan Shields said.
National data custodian
Closer to home, RFi Group research found that in Australia banks are the most trusted institution in terms of data security and privacy regardless of age – with banks outranking technology and even government agencies when it came to trust and privacy issues. This result is consistent with a recent Deloitte privacy survey.
In terms of being comfortable with sharing personal data with banks if in return they are able to provide improved product and services, 55 per cent of millennials were comfortable compared with 45 per cent of generation X and 42 per cent of baby boomers.
Shields acknowledged that banks with foresight are already preparing to operate in an open banking environment, with open APIs.
“On the consumer front, if we solve privacy and security concerns, then account aggregation is clearly an attractive driver of consent among younger consumers and it is here that the banks must carefully choose their positioning," he said.
Among the Productivity Commission’s recommendations to strengthen data sharing and privacy, was the introduction a new Data Sharing and Release Act, a new national data custodian and “accredited release authorities” to oversee the process to collecting and accessing data.