Open banking to ‘revolutionise’ the industry

The cross-sector availability of customer data is among the recommendations put forward following the review into the implementation of open banking in Australia, initially commissioned on 20 July 2017.

Following the report’s release last week, Treasurer Scott Morrison claimed that open banking would transform the sector by simplifying and enhancing customer choice, with the report noting that it would “significantly ease” the process of applying for a new product.

“Open banking will revolutionise the financial services sector, transforming the way Australians interact with the banking system by giving consumers the right to safely share their data with other banks, other institutions and innovative fintechs and get themselves a better deal,” Mr Morrison said.

“Granting third-party access to a customer’s data will allow rival providers to offer competitive deals, products that are tailored to individual needs and enhanced services that simplify the choices customers face when accessing banking services.

“It should simplify the process of switching between banks and help to overcome the ‘hassle factor’ that sees customers stay with their current bank even in the presence of more competitive deals elsewhere.”

Under an open banking system, financial service providers will be given access to:

• Transaction data: data that is generated as a result of transactions made on a customer’s account or service.
• Value-added customer data: data that results from effort by a data holder to gain insights about a customer.
• Aggregated data sets: created when banks use multiple customers’ data to produce de-identified, collective or averaged data across customer groups or subsets.

Further, Mr Morrison claimed that open banking would incentivise better service for customers by strengthening competition in the market.

“Having access to potential new customers’ banking data — with their consent — should enhance the ability of providers of banking services to compete more strongly for new business, delivering cheaper and better tailored products for customers,” the Treasurer added.

“The ability to instruct that their data be shared with competing banks could also usher in a new era of competition in banking for small business customers.”

Mr Morrison added he believes that open banking would place customers in the “driving seat” when seeking financial products.

Concluding, the Treasurer said: “Whether it’s a mortgage, whether it’s any credit product, whether it’s a credit card, it’s putting customers back in the driver’s seat and not at the mercy of large, big banks. It means they can drive what’s happening in banking in this country, and not have it dictated to them, because it puts them in the driver’s seat.”

[Related: Cyber risks the biggest threat to banks: Westpac]