A recent nation-wide survey conducted by Credfin determined that 75% of respondents had not heard of the term Open Banking. Whilst Open Banking is new to Australia, these figures are concerning, as Open Banking and broader Consumer Data Right originate from consumers’ rights to access and control their personal data. How integral is it for consumers to understand the Consumer Data Right and its first sector, Banking, and how can we promote it further?
How CDR is set to shape the future
Data sharing is not a new concept. It’s been around for decades and practically shapes the world we know. From catching rideshare to creating a new bank account, data is everywhere. In Australia, what has changed is the concept of consumers knowingly controlling who and what purpose their data may be shared. The new revolution of Open Banking is ready to disrupt the financial sector, and here’s how…
Basiq’s whitepaper, Four Future Use Cases for Open Banking, encapsulates how Open Banking is set to shape the future of financial services and presents a sound prediction of the potential of this revolution. The below points summarise the prominent use cases discussed within the Basiq whitepaper and underline how crucial knowledge of Open Banking is for consumers. To read into more detail or download the whitepaper, visit the Basiq website.
Use Case 1 – Dynamic Credit Risk Decisioning
Not only will Open Banking allow a more dynamic and frictionless system to perform credit decisioning, but it also has the ability to detect income fluctuations and normalise balances to assist in an enhanced process. This allows consumers to enjoy a personalised experience with their lenders as they are offered better deals, offered better repayment options, and receive proactive messages if a payment declines.
Use Case 2 – Rules and Event-Based Payment Initiation
One Open Banking use case that has been implemented into Europe’s successful PSD2 scheme is combining data and payments. The relationship between a data aggregator, like Credfin, and a payments provider could form a bond to allow transactional actions to occur based on a change in the data state.
Use Case 3 – Sustainability Scoring for Fintechs
According to Visa’s sustainable banking report, consumers are demanding to see four aspects of sustainability in their banking experience. These being: “understanding their carbon footprint, offsetting their environmental impact, incentivising behavioural change & anchoring their impact on the world”. From carbon calculations on merchant identifiers, which determines a carbon score, to partnering with green brands, Basiq’s prediction for the future of Open Banking is one that puts the consumers’ concern for the environment first and foremost.
Use Case 4 – Autonomous Personal Finance
Open banking has the potential to automate a consumer’s personal finances fully. Basiq discusses that “In aggregating your accounts, you could run a sophisticated insights engine on top of the transactional data set to determine which subscriptions are due in the upcoming month, and automatically nominate each one to be debited from your account”.
Not only will the banking sector be significantly affected by this change in data sharing, but the energy and telecommunications sectors are also not far behind. Soon enough, most if not every sector will be impacted by the CDR. Active research by the Treasury Department is currently examining those sectors that will pose the most significant benefits and enhanced customer experiences.
How CDR and Open Banking are relevant to consumers
Let’s consider the potential use-cases and the enhanced consumer protections that Open Banking may offer. It’s clear Open Banking has the potential to override outdated systems and introduce a new wave of tech-enabled innovation to what some consider a set-in-their-ways financial sector. And this is precisely why consumers need to know about it and should get involved in exercising their Rights.
The potential benefits of CDR for consumers are extensive by returning the power of choice to the Consumer, all whilst leading a tech-enabled innovative revolution. The consent-driven concept allows consumers to pick and choose what data they would like to share and to which company. Consent is key. Without consent, a company can’t access customer records, and your bank will not share your data with an app or a fintech; much like without signing a contract, the everyday business can’t occur. Data recipients and financial institutions can then transparently assess the data, determining a tailored banking experience.
For more detail about the benefits of CDR and Open Banking for consumers, head to our blog Guide to Open Banking: Benefits for Consumers.
What Businesses can do
The baffling figure of 75% of survey respondents not having heard of Open Banking is cause for concern. Currently, many businesses that are actively promoting this concept of Open Banking are companies with Business To Business models. They are the companies, like us, that work with businesses rather than directly with clients. Customer-facing businesses, like lenders and banks, should actively promote the changes and the information and resources they have on Open Banking and CDR. Over time, through blogs, newsletters and social media posts, more and more consumers will be exposed to Open Banking.
We also believe the Australian Government and the ACCC, in the capacity of regulator for enforcement and compliance of CDR, could do more in promoting Open Banking. A targeted marketing and information campaign, fitting with current societal expectations of multi-format advertisements, should be utilised to introduce the concept to the general public and establish a trust framework around the newly introduced legislation and standards. This should be the minimum effort required to promote the concept to the relevant demographic, which now spans seven recognised generations from Generation Z to the WW II generation. With the promotion of CDR, more and more consumers will understand the implications of Open Banking and how it will affect them. With trust and information, consumers may choose to utilise Open Banking and experience the transformational quality of the tech-enabled innovation. After all, it is all about the Consumer.