Apr 30, 2020
What Australia can learn from the UK about Open Banking legislation and implementation
Australia has a great opportunity to lead the way in consumer experience when it comes to the emergence of open banking and consumer data legislation in this country, which is currently (at the time of writing) due to be enforced by July 1 2020 (For the first wave of participants and reduced API & product scope, limiting the open banking use cases and potential benefits to the consumer)
The UK and the EU were amongst the global first to introduce open banking with many organisations suggesting it was a somewhat underwhelming start. Due to the pressure to meet deadlines and regulatory conditions, the UK missed the boat on educating its consumers about the real benefits of comprehensive data access, and how it can increase the potential for significantly improved consumer outcomes and personalised experience.
Research from Experian indicated that more than 50% of those surveyed didn’t associate any real benefit in sharing their account information, and this is reflected in the adoption rates. Innovo believes that this is down to a lack of education and enablement for the consumers and not because there isn’t a benefit. Also from an AU perspective we seem to be obsessed with mortgages, so generating interest in any other open banking use cases other than mortgages is difficult. Given the all time record low interest rates that all banks seem to be offering, the distinguishing factor going forward could be the Customer Experience provided by the fintechs / neobanks.
It’s crucial when implementing any new initiative, like with machine learning or AI for example, that consumers have all of the information they need to build trust with the new model. Providing consumers with an in-depth understanding around how and where -their data will be used is critical in building this trust with the Australian community. The CDR eco-system needs to be 100% secured to protect consumers ‘data in transit’ and ‘data at rest’. Unless consumer data is 100% protected, gaining trust from the consumers is going to be hard work. Another question that remains unanswered is that how can the regulator assure the consumer that their data does not leave the Australian shores.
It’s understandable that consumers would be cautious to share their data given the myriad of ways data can be misused, which makes it even more crucial that the Australian government supports the effective rollout of this program. One way the government is doing this is via the ‘Consumer Data Rights’ bill, which intends to ensure Australians have the facts they need to find the best solutions across banking products and loans. This will later include energy and telecommunication services as the rollout continues.
The UK approached the implementation with compliance first, understandably working to ensure regulations were being covered off appropriately, however this meant the majority of focus was on technical implementation leaving consumer education as a later priority and perhaps missed opportunity.
Ultimately, the technical innovation here is intended to provide a better customer experience and to put the knowledge into the consumers hands, however without a good understanding of why their data is needing to be accessed, there isn’t a driver for uptake for consumers.
When the program launched, the UK banking sector had minimal accredited third parties geared to access the data, this meant almost no testing was completed to ensure the business needs were being covered appropriately and this had a negative impact on the end consumer.
Now the market is slowly catching up and putting in place key components including educating consumers, adoption of the new technology, user experience and evolved standards. UK blatantly ignored the CX aspect of the implementation as opposed to AU that has provided a well defined set of CX guidelines – however each party is free to interpret these standards and implement a solution accordingly. ACCC has made a reasonable assumption here that it is in the participants interest to provide good CX to their customers.
Although the UK has struggled to phase open banking into its market with all components included, the goal is to have open banking be dependable, scalable and seamless so that consumers can enjoy the benefits of real time data, and access to services that they truly need.
It took around six months to get open banking kicked off in the UK and a number of years for transactional operation, and now the banking sector is completing millions of transactions each month via this new initiative. The stats show a steady growth curve, which shows that although the UK got off to a slow start, consumers are working with this and echoing its benefits in an increasing fashion.
The upside is Australia has a lot to learn from the UK rollout, and although we can expect rollout to continue to move relatively slowly, customers will begin to resonate with the idea to share financial information if it is truly going to benefit their experience and provide them with the key services they are looking for.
Australia is among the first countries adopting the open banking framework, meaning we are at the epicentre of the learning curve of trusted data exchange, which is an approach that puts the customer first. As this rolls out, consumers will learn that consent must be required for any data to pass through, and that any automated machine component cannot continue its process without consumer consent.
The balancing act for businesses like Innovo, who are rolling out an open banking framework in collaboration with financial enterprises, will be to ensure there are efficient resources to handle compliance whilst also responding to and inspiring customers with new data capabilities that lead to tangible benefits for them. Like any new industry or operation standard, if the industry can educate well, consumers will enjoy the move toward a machine-automated future, knowing they have clear objectives in how their data is being used.