While banks might feel like in giving away data as part of open banking they are losing a lot, there are plenty of opportunities to gain, says John Moran area vice president, financial services at Salesforce.
At its core, open banking is about “empowering the customer”. The banks are in the next stages of doing this after the Consumer Data Right was passed through parliament last week.
Phase one already began on 1 July, with three of the four major banks beginning to share customer data. But the opportunities – and the challenges – are still little understood.
Moran says open banking started as an extra compliance requirement “in an industry that’s exhausted by the amount of compliance it carries” - and for those bigger banks, they are being told all the data they hold is no longer theirs.
The fintechs and smaller banks have the most to gain and Moran says some of these players are getting ready ahead of time because they see the opportunity.
“I think in some cases it’s the small organisations that might end up leading the way a bit,” he says.
Open banking and mortgages
Moran says there are some huge opportunities to improve the customer experience, such as introducing artificial intelligence (AI) and streamlining the application process.
Mortgage brokers will also have access to the data from open banking and the “smarter” brokers will use that.
“The longer term for brokers is they play a vital role in what is a very big, largest decision that consumers make in their life. The purchase of a home or commitment of a mortgage on an investment property,” Moran says.
“Few people in this country are entirely comfortable on making those decisions entirely digitally. Brokers can put themselves in the customers side of the situation. They need to be able to offer the same straight-through service. The institutions will increasingly leverage open banking in their mortgage broking channel.”
Data is the new oil
For the financial institutions being told to hand over their data, open banking is both a threat and an opportunity.
“If you’re a large bank you have got huge data sets on those customers which have incredible value,” Moran says.
“Data is the new oil. That is going to be the new fuel or the new business model or the new way to provide financial services.”
For those banks looking at how they can seize the opportunity, Moran says there will be many months of brainstorming.
“What is the future? What is the opportunity that we have to bring more value to our customers? Let’s get creative,” he says.
“It's hard to predict how this plays out. We’re going to be talking about this for the next six months.”