When we speak about Digital Disruption, nothing compares to the change that will affect the Financial Services sector like Open Banking.
What can our major Australian Banks do to stay relevant? This article outlines 4 areas they will need to consider.
This new operating model and regulatory framework will change competition; promoting innovation, collaboration and productivity and allowing customers back in control of their own data. Privacy and data security will become more crucial.
The first iteration of Australia's Consumer Data Right (CDR) for finance through an open banking system went live on 1 July 2019. Currently, the mandate will only apply to the banks' own product data. They also shifted a portion of the open banking scope for major banks to 1 February 2020.
Better and more cost-effective data access has the potential to decrease barriers to entry for new providers and incentivise existing providers to bring new offerings to market. Improved data availability and lower costs for receivers of data may provide opportunities for innovators to develop:
- new banking or related services (e.g. risk mitigation services);
- new non-banking services using the data (e.g. analysis of spending behaviour); or
- improvements to existing non-banking services (e.g. better connections with accounting software).
What can our major Australian banks do to stay relevant? Here are 4 areas they will need to consider:
- Invest more in analytics and artificial intelligence and uplift their other capabilities if they are to add value to customers.
- Have an effective application programing interface (API) to connect with their banking ecosystem to enable secure data sharing.
- Considering the impact of the Banking Royal Commission, ensure they have the appropriate data governance and architecture in place to meet the Open Banking Standards.
- Most importantly, create a value proposition that can engage and attract new customers.
Clearly consumer sentiment is a key driver for Open Banking that will boost competition and allow consumers to negotiate better deals and save money. There will be the need to redesign the customer journey; making it easier for Australians to assess, select and manage their finances.
The Banks, Financial Institutions and Financial Technology (Fintech) firms that embrace the innovative opportunities created by Open Banking to compete and entice consumers with new services and offering will be the ones to unlock increased market penetration and reap the rewards.