The imminent arrival of Open Banking is scheduled for rollout across Australia’s top four banks this July with other financial institutions to follow their lead in November.
By July 2021, every bank in Australia needs to be Open Banking ready and able to provide access to product, account and transaction data for personal loan and other accounts. The passing of Australia’s Open Banking legislation will enable consumers in the future, the authority to direct banks to share their credit and debit card, deposit account and transaction account data with accredited third-party providers.
With Open Banking’s disruption to the financial services landscape, Australian Bank’s should pay close attention to what they can learn from their counterparts in the UK, where Open Banking is already in the market. Open Banking will bring with it opportunities for the market to capitalise on, however this will require banks to focus and invest strategically – to not only meet regulatory compliance, but also educate their customers on the advantages and ensuring their digital online and mobile platforms are ready for the July 2021 deadline.
Will Australia reap the benefits and learn from the UK experience?
The low adoption rates in the UK around Open Banking has resulted in only 15% of banks registered on the UK Open Banking directory. This lack of interest can be attributed to several different factors, however the three main drivers have been regulation, complexity and fear.
It is no secret this digital disruption and transformation is a complex and costly exercise. Banks are having to upskill and invest in technologies that will require significant investment to install necessary infrastructure and support processes.
Unlike the UK, Australian banks and financial institutions should seek to initiate Open Banking focussing on unlocking the potential benefits which include:
- Increased operational efficiencies
- Cost savings
- The creation of digital revenue streams
- Utilising existing software to create new innovative services – Enhanced customer experience
With these opportunities on offer and the competitive landscape that will introduce new players amongst Financial Institutions and industries such as education and utilities. Banks can either embrace Open Banking taking advantages of the opportunities laid out before them, or choose to look at Open Banking as a burden and focus only on meeting regulation and compliance standards set out by the government and the Australian Competition Consumer Commission (ACCC), resulting in missed opportunities.
Dom Monty, GM of Digital Banking, Sandstone Technology comments:
“The impact of Covid-19 globally has also resulted in poor financial well-being of so many people dramatically which is only likely to increase. This emphasises the importance of Open Banking adoption for banks to leverage its capabilities and to address current systems which are ill equipped to help consumers effectively manage their financials.
Furthermore, Australian banks and their Open Banking initiatives will be navigating in a landscape post Covid-19 and whilst consumers may not understand or really care about Open Banking, it presents an opportunity for banks to lead and join forces with new entrant competitors for all to benefit. The result, to enable consumers with their everyday money management to achieve greater control, improved financial freedom and well- being”
As the term Open Banking is now so closely attached to regulation, it is perhaps no longer appropriate to be used as a description for a bank digitising their business. Perhaps a more appropriate term would be ‘Banking as a Service’ (BaaS) which some organisations have started to do. The expectations set around Open Banking to create a marketplace for financial products, drive innovation and improve customer experience will ultimately depend on how Australian banks and financial institutions approach this new way of handling data.