Across the western world, regulators are pushing banks to open up access to customer data to give the consumer greater control.
With the Competition and Markets Authority (CMA) changes for the top nine banks in the UK, PSD2 in Europe, discussions driven by the Consumer Financial Protection Bureau (CFPB) in the USA and Australia’s Open Banking review, it won’t be long before the concept of “ownership” of the customer and their data becomes “last century”.
Instead, customers will be able to control who has access to their data, ranging from a complete list of all transactions to their salary history, their loan and utility payments data. They will also be able to opt in which financial providers, bureaus and fintechs are allowed to see their data and offer them services. This is much more profound than even positive credit reporting — it combines fine-grained earnings and affordability data with customers’ repayment history and even their spending on their lifestyle (are they a gambler? How much do they spend in liquor stores?).
In the technology world, the most successful businesses have been built from the ground up to be platforms. Think of the Apple App Store and Apple devices; their value is in the number of third-party apps they host. These are not built by Apple; Apple is the platform on which others build value. The Apple platform ecosystem becomes more valuable the more others build through it.
The same principle applies to the other technology giants like Amazon, Microsoft, Google, Twitter and Facebook. Their platforms are built through extending their services with Open APIs, which enable them to work with partners — for example, I can Tweet an article from inside LinkedIn, or sign into a website using my Facebook credentials, or order an Uber from inside Google Maps.
With open data, banks are looking at ways of embracing platform, thinking as a way to stay relevant. Rather than be disrupted through others using the customer data they store, many are looking to create Platform Ecosystems in which fintechs and other service providers can seamlessly interact using customer data as customers “opt them” into the data. In Australia, Macquarie has already announced an open banking platform that will be launching soon.
When banks become open data platforms, the world of broking will be impacted by both opportunities and threats.
Opportunities include far easier access to customer data and the associated ability to rapidly deal with the paperwork associated to a loan application, leads for new business being made available through the platform ecosystem for customers needing finance, and the ability to add additional services that meet customers’ need using their data (for example, the appropriate insurances).
Threats include the enhanced ability for artificial-intelligence and machine-learning technologies to learn about customers and make offers to them through digital brokerages, existing digital offerings accelerating their customer acquisition with more data and ease of use, and more rapid integration to unified service offerings such as combined property listings and brokerage portals.
To prepare, brokerages need to have access to good tools that are ready to integrate to banking platforms and can help them scale out across new ecosystems and use new data. Brokers should also keep an eye on the happenings in the UK and what these mean to Australia.
Above all, a focus on customer service and through service retaining and growing relationships with customers will help [brokerages cope], regardless of how much of an impact open banking platforms has.
Greg Dickason heads up CoreLogic International Innovation & Technology.
He holds an MBA from University of Southern Queensland, specialising in Finance and Business. He also holds a Master of Engineering Degree from The University of Cape Town.