Banking is open for innovation
Open banking is about to become big news in 2019, but what does it mean for customers and improving service delivery?
You’re on the hunt for a new credit card and goodness, it’s the most dreary task you’ve ever attempted (apart from that awful day, two years ago, that you wasted trying to find a better home insurance deal!).
You compare interest rates, annual fees, interest-free periods, frequent flyer benefits and more. Before you know it, you’ve got a spreadsheet filled with numbers and a mind filled with confusion.
Leap forward to the second half of 2019, when open banking protocols have become compulsory amongst the big four banks. You’ve given an app on your smartphone access to your banking data as well as other lifestyle information, such as spending habits on travel and other products and services.
The app’s AI knows that you pay off your credit card balance in full every month and that you’re a relatively frequent flyer, so it automatically recommends a high-interest credit card with exceptional travel rewards – you’re never going to be charged interest because you pay it off every month, but you’ll certainly benefit from the frequent flyer benefits.
The app also analyses your mortgage, insurance, loan and savings needs, constantly updating its recommendations as your spending habits change and new financial products become available. And it’s all done automatically, no more sweating over a spreadsheet!
Customers will be the big winners after open banking’s introduction on 1 July 2019, explained Stuart Stoyan, founder and CEO of MoneyPlace and a member of Data61’s Data Standards Body Advisory Committee, the fintech advisory group to the Federal Government.
Banks and other financial entities that put customer experience at the centre of their strategic plans will also benefit.
Open banking = customers first
What exactly is open banking? According to Stuart, it’s about enabling customers to share their data as they see fit. No more fumbling through bank statements and filling out endless forms just to open a new savings account, or apply for a car loan.
“It’s really about enabling customers to share their data from one institution with another institution, whether that be a bank, a non-bank or a fintech,” Stuart said.
“It’s as simple as saying, ‘I should be able to do through open banking what I can do with a bank statement’.
“So if I have a hard-copy bank statement, I can give it to a financial institution and say, can you give me a better loan? Can you give me a better interest rate on my credit card?
“Or can you look at my transaction history and tell me what I should budget for and spend my money on? Open banking is about being able to do that online and automatically.”
Do we need open banking?
Open banking is important for a number of reasons, emphasised Stuart. It will bring increased competition, portability and transparency to financial services, always with customer outcomes as its focus.
Comparisons of various products and services, which are typically extremely complex and therefore difficult, will become much easier and less confusing. And it will ensure banks present information in a standardised and simple way that enables people to switch accounts with ease, and to better understand their financial position.
“Initially, major banks were quite resistant to open banking,” Stuart noted. “The belief was that the data belonged to them, that it was their IP. There’s been a realisation through the open banking journey, and also through the Royal Commission, that the data actually belongs to the customer.
“There has also been a recognition that banks need to do more, as custodians of the customers’ data, to help customers achieve better outcomes.”
Make no mistake, he said, open banking will dramatically alter the Australian banking landscape.
“This is a game changer for consumers, for small businesses and for financial services,” highlighted Stuart. “It enables consumers to harness their data for their own benefit and it will drive competition.
“If a financial institution is not participating in open banking and is therefore not putting customer experience at the centre of everything they do, their customers will go to service providers that are embracing open banking, because that will lead to them getting a better result.”
About the author
Chris Sheedy is one of Australia’s busiest and most successful freelance writers. He has been published regularly in the Sydney Morning Herald, Virgin Australia Voyeur, The Australian Magazine, GQ, In The Black, Cadillac, Management Today, Men’s Fitness and countless other big-brand publications. He is frequently commissioned to carry out copywriting and corporate writing projects for organisations, including banks, universities, television networks, restaurant chains and major charities, through his business The Hard Word.