The recent release by Treasurer Scott Morrison of the long-awaited Farrell report into open banking along with draft legislation marks a crucially important moment for the Australian economy and our international competitiveness.
Open data, and in particular open banking, promises to drive increased competition along with better products, services and experiences. Given the considerable benefits that will flow to consumers, no responsible government can ignore open data’s potential.
Nation’s that embrace the opportunity early will boost their competitiveness and attract data-driven business to their shores. Those that fall prey to fear will be cut adrift.
Given it’s so fashionable to dislike big banks, it would be easy to forget the crucially important role they play in funding economic activity and growth.
Open banking will facilitate faster, cheaper and increased lending, including to smaller innovative businesses, as customers are empowered to shop around and banks operate with a clearer line of sight to risk.
The most obvious parallel is the insurance industry which has enjoyed a form of open data for decades. In insurance, underwriting data is freely provided by the consumer in the process of acquiring cover, just as open data will soon be provided.
When you go to buy a policy, your insurer can instantly assess your personal risk profile, price and sell you what you need.
If you don’t like the quote, all it takes is a quick phone call to switch providers. So, while buying insurance is not among the most exciting of customer journeys, it’s largely hassle free.
Contrast that with the abundance of process involved in securing a loan or switching your bank and you get a sense of the potential of open banking. Given banking’s central role in all we do, commerce will simply work better.
In a world of open data, consumers will be empowered to share a range of data with potential lenders at the touch of a mouse button. This will radically simplify risk assessment on financial products and beyond, leading to quicker and less arduous customer journeys.
While banks know plenty about their own customers, their knowledge of new applicants is less advanced, and the risk of the unknown needs to be priced in.
Open banking will bring new competitors, not least the global tech giants, but Australia’s banks must back themselves and leverage the considerable benefits that come with incumbency to imagine and shape the future of financial services.
They must disrupt themselves or else be disrupted. The winners will be those who can best imagine what the future of financial services will look like and then make it happen.
And it’s not just the banks that can take advantage. A range of industries will use the data to improve and personalise their offer and develop new products and capabilities – all to the benefit of the consumer.
Data privacy and protection is crucial and it’s inevitable that some will fear the change. This may have something to do with the fact that such excellent news was released on a Friday afternoon.
Some have floated the concept of a monopoly data ecosystem to deliver maximum data security.
Given the key objective of open data is to drive efficiency and flexibility into the economy this seems at best counterproductive.
Such arguments usually come from a place of commercial self-interest and ignore the fact that open data empowers consumers – they are in full control and it is entirely their choice whether and with whom to share their data.
The Farrell report is Australia’s first step in an emerging open data revolution that will place consumers in the driving seat. Australia must fully embrace the opportunities it brings in order to secure its future as a knowledge economy.
Greg Schneider is an Executive Director and co-founder of Quantium, a leading global data science, applied analytics and AI business headquartered in Australia.