If you're not already considering the impact of Open Banking on your business, industry and personal life, you need to be. Now. The rise of Open Banking will change the fabric of commerce in Australia. It will drive innovation, encourage increased competition and usher in an entirely new financial services playing field. This article is poised as a primer into Open Banking and the predicted impacts of releasing data and using it to personalise transactions.
The Open Banking framework will establish and govern standards for how retail and commercial banking data is shared via APIs in accordance with applicable laws and regulations, and manage how participants are authorised to access the ecosystem. Participants will be required to meet regulatory requirements as well as security and privacy standards, with rules in place determining when and how access is granted or revoked. Open Banking is part of a wider movement to share data across industries, with Open Data movements developing across sectors including Telecommunications and Government to name a few.
While more trivial data points are already exposed by some major Australian banks through APIs, such as branch locations, branch opening hours, ATM locations and product offerings, we anticipate that similar to the UK standards, Australian Open Banking will mandate large financial institutions to provide much more sensitive read/write access to current account and unsecured lending facilities including commercial credit cards. When approved by end customers, third parties will be approved to access account information and/or provide payment initiation services.
The Role of the Banks
Banks' roles will change dramatically; with a push for them to open up their data vaults, banks will be required to create new means and channels to facilitate customer connectivity to their data, just to stay competitive. Fuelled by open APIs and SDKs, this revolution in data transportability will allow customers to take ownership and securely share their banking data. The growing trend towards commercialisation of data has the potential to generate greenfield revenues for banks, as data consumers look to gain benefits from premium services, like access to risk and commercial modelling metrics.
Security concerns will provide a significant barrier to entry, with Open Banking participants needing to meet a raft of requirements. Participants will need to ensure competencies like appropriate information security policies and procedures, penetration testing and issue resolution mechanisms, and IT system controls around infrastructure and applications to name a few. This will see incumbent financial services providers, large merchants and established fin-techs gain an advantage, as they are most likely have many of the elements in place already to meet minimum security standards.
"The rise of Open Banking will change the fabric of commerce in Australia"
The Impact on Retail
As Open Banking services mature, integration and rich data analysis across limitless domains like social media, AI and ML platforms and government agencies, will result in an entirely new level of engagement and understanding between businesses and their customers. For example, retailers can apply for direct access to customers’ financial data and provide payment initiation services, which until now, was exclusively controlled by banks. Greater convenience, through increased personalisation of product propositions and more direct access to services across new channels, will pave the way for improved loyalty programs, enhanced customer experience through flexible payment options and faster refunds, and reduced transactional friction.
Personalisation of Data
Real time competitive offerings, driven by access to and analysis of transactional data streams, will reduce margins via pricing pressure, as consumers authorise access to their data for their benefit. Nevertheless higher value interactions with customers could boost brand loyalty, reduce churn rates and increase customer lifetime value. Coming back the other way, banks will be able to gain access to data relating to products and services procured by their customers from other providers, facilitating improved risk modelling, loss provisioning and more stable capital returns.
At present, Australian enterprise lacks wide spread scalable and cost-effective environments, where internal and external data assets can be effectively consolidated and commercialised. Businesses that front load investment into complimentary data platform technologies will benefit from superior customer understanding and interaction, increasing sales to existing customers, identifying and enticing new customers, and protecting market sharing attrition to more agile and innovative digital competitors by leveraging the benefit of insights provided through prevailing data assets.
The DataOps Revolution
We expect a DataOps revolution is just around the corner for the Australian Financial Services sector. DataOps seeks to enhance collaboration and increased agility of data processes, including ETL procedures, data curation and cataloguing, log analysers and systems monitors, as well as open source software products that allow applications to seamless blend structured and unstructured data. DataOps will drive faster and higher quality changes to data analytics, with automation and optimisation of data pipelines from data collection, preparation, processing and reporting providing for continuous improvement.
The Future of Data in Australia
As part of our review of the imminent mandate of Open Banking in Australia, Vibrato will publish a series of articles discussing innovation, technology and commercial implications for Australian commerce and consumers. These will include who will participate in the Australian Open Banking ecosystem and what their primary application will be, how participants consume and action insights from data in secure and scalable methods, and what impact Open Banking framework will have on how applications are architected, tested and deployed.