In my last post, I looked at the implications of Open Banking on the financial services industry. But what does it mean for consumers?
Giving control back to the consumerThe underlying principle for the entire CDR and Open Banking exercise is to put the consumer back in control of their financial life. The consumer’s ability to own and share their information, allows for bespoke financial products tailored to them based on the insights and understanding their data provides.
Australia is not the first country to implement the concept of Open Banking, and is considered a late adopter behind markets like Europe, Great Britain, Singapore and India.
Countries like the U.S., South Korea, and Hong Kong have tried to lower competitive barriers and foster growth amongst innovative FinTechs, by creating simpler Digital Banking Licenses.
The United Kingdom, Brazil and Singapore are great examples of where consumer privacy and open banking have been used as a lever to lower competitive barriers by democratising access to consumer data that is held by the big banks. The UK, for instance, has gone through 14+ months of PSD2 (Payments Services Directive 2) and Open Banking-led sharing of accounts and payments data between Financial Services organisations.
Emerging consumer patternsWe see four overarching use case categories emerging through Open Banking:
- Easier onboarding through new products that streamline the customer experience of signing up through features like: pre-filled, customised application forms, and pre-verification of identify that leverages on the data available through Open Banking
- Bespoke and unbundled products including specialised offerings, micro-products, personalised advice and combination offerings tailored to specific consumer needs given insights gained from their consumer data
- Comparison and aggregation that uses the product data and consumer data available through the Open Banking APIs, comparison engines and aggregation marketplaces, to provide more specific consumer advice based on tailored comparisons.
- Banking + Ecosystem that will become seamless and ubiquitous, integrated into the life of a person across their interactions with retail, utilities etc.
As I write this, I Imagine a tomorrow supported by Open Life...where I can walk onto a train at Central Station, and because I’ve granted Transport NSW permission to hold my data, the train automatically knows who I am and that I’ve started my journey. As I finish my journey, for example, at the airport, the train service automatically connects to my bank and charges me for the trip, all with minimal intervention from me.
What could this look like for a consumer?
As I walk out of the station to my favourite cafe at Terminal 1, (they know I’m close because I’ve granted them access to my location and payment data ), my personalised extra hot-double-shot-soy-flat-white is waiting for me to enjoy – paid for automatically.
As I board my flight, my utilities company realises that I am travelling with my entire family (again, I have given them permission to access my travel and payments data) and hibernates my connection to $0 charges, as per my personal preferences.
While this future might sound utopian, (and like something out of a sci-fi movie!) it can be real in Australia given how the CDR regulation is defined across industries.
We’re excited by the new world of Open Life, that empowers the consumer and puts them in control of their financial data. We’ve been working closely with Open Banking Regulators to help build the foundations for Open Life, including our work in helping to create a Consent Management Framework for Open Banking. We’ve also got a strong position on Trust Based Consent, and key considerations for the big banks as they set up their consent frameworks which I'll talk about in future articles.
In my next post, I’ll delve into the immediate steps I believe the banks and FinTechs can take to ensure they’re best placed to support their customers.