Back in November 2017, the Australian Government announced the introduction of a Consumer Data Right (CDR) to improve consumers’ ability to compare and switch between products and services. It’ll first be applied to the financial services sector under what is known as Open Banking, writes Nick Caley.
According to research from comparison site Finder, 40 per cent of adults are still with the same bank they had as a child. Open Banking will encourage competition between service providers, leading not only to better prices for customers but also more innovative products and services. Ten financial services companies and the Big Four banks are already taking part in pilot programs of Open Banking, which will test the performance, reliability and security of the system before it’s widely rolled out in 2020.
Establishing trust and transparency
The revelations from the banking royal commission has eroded trust with existing customers and are still fresh on the minds of the Australian public. Open Banking is an opportunity to promote greater ease of use, choice and flexibility for customers. It is a chance for financial institutions to reset their relationship with consumers and build a relationship based on trust and transparency.
For banks, and in fact any company handling consumer data, making consumer consent a central part of their strategy has never been more important. Together, the regulatory changes of the CDR and the public pressure following the royal commission, demand a more transparent and consumer-centric approach to data sharing and management.
Confusion around data collection could stall innovation and limit consumer acceptance, despite the benefits the Open Banking framework can bring. These days, consumers are taking a greater interest in their data and, without education, the levels of data necessary to enable greater personalisation and continuous authentication, could sound inconsistent with banks’ promises over privacy and personal data. Banks need to make consumer consent a central part of their data sharing and management strategy.
By putting consumers in control of how and under what circumstances their information is shared, implementing dynamic consent and taking transparency seriously, organisations will grow consumer trust and build positive long-term relationships with their customers. This will in turn allow them to offer additional services, based on personalisation, and explore new revenue streams.
The data difference
As the trusted custodians of banking data and the customer relationship, Open Banking gives banks an unrivalled opportunity to add value for their customers, even becoming the digital service provider of choice, over and above fintech. The potential to aggregate data from customer accounts at other banks into one place, providing both the bank and customers with a single view of their financial information, is immensely valuable for all parties. However, this is an opportunity that must be seized quickly and embraced by banks wholeheartedly to compete with other banks and fintechs. This will undoubtedly become the focus of competition and differentiation in the banking sector in the years ahead.
Open Banking is paving the way for Australian financial service providers to re-examine how they approach data protection and to take an active role in ensuring customers know how their data is being used.
Australian financial service providers have been given a golden opportunity to make the most of the unique situation they find themselves in: by building on their existing consumer relationships and putting customers firmly in control of their own data.
*Nick Caley is the Vice President Financial Services & Regulatory at ForgeRock
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