This article is part of our August series about the state of financial services. Click here for more.
Trendwatchers across APAC have flagged open banking as a trend that could revolutionise the financial services sector.
In a nutshell, open banking allows third-party developers to build applications and services around financial institutions through open application programming interfaces (APIs). It also gives consumers the power to better manage and share their financial data with third parties. A good example is Visa Checkout, which is an open API that is being used across a plentitude of third-party applications and services today.
The introduction of open banking isn’t the end point, however. It is part of what the Australian government has enshrined as the “consumer data right:" the right for consumers to own their data and provide it to whomever they please. Expect to see open data eventually spread into other industries, such as healthcare, utilities, and telecommunications.
With that in mind, here are five things that marketers need to know about open banking.
1. Open Banking Will Build Better Consumer Relationships And Experiences
According to a recent report, Singapore leads APAC in terms of its readiness for open banking. What’s been seen in Singapore is a proliferation of new financial services, as well as existing players competing strongly for new and existing business.
“The disruption with open banking will also open up the traditional financial institutions to new competition, which will drive faster innovation and increased customer experiences within these institutions and across the broader market,” said Dermot McCann, chair of the Australian Information Industry Association’s (AIIA) Financial Services Group, in an interview with CMO.com.
Consumers stand to benefit the most, noted Mark Perry, APAC CTO at Ping Identity, a digital identity services company that is involved in the Australian Government’s consumer data right program.
“Institutions will be able to build closer relationships to consumers using open banking,” he told CMO.com. “They will be able to create useful applications for consumers and gain access to banking data from other financial institutions, helping them tailor their product offerings to suit individual circumstances.”
2. Who’s Ready For Open Banking?
Open banking is spreading across Asia Pacific. According to IDC, there is extensive competition in the region, enough to be seen as leading the way for others when it comes to open banking. At this stage, Singapore, as mentioned, and Hong Kong are ahead of other jurisdictions, and Australia, which will embrace an open banking environment in July 2019, is not far behind. (See infographic at the end of this article.)
“At this point, open-banking adoption will be prodded on by regulators who are themselves competing to be seen as the most proactive regulator in the region,” said Michael Araneta, IDC’s AVP for financial insights, Asia Pacific, in a statement. “The regulatory framework for open banking will be comprehensive, touching on various aspects of customer data protection, IT security, and customer fairness.”
Araneta said that banks will need to align themselves with these key factors before their competitors and new entrants do so.
3. Open Banking Will Benefit Those Working In The Financial Services Industry
An issue currently faced by financial services professionals is a reliance on their clients to amalgamate all of their financial information so a service can be provided–a cumbersome task for even the most organised.
“Under open banking, clients can instead provide authority to data which will ensure all information can be provided more efficiently, transparently, and easily,” said Benjamin Marshan, head of policy and standards at the Financial Planning Association of Australia (FPA). “It will allow financial advice providers to monitor data on behalf of their clients and keep them on track to meeting their financial objectives.”
With an open-data regime, consumers will have a greater choice of financial services companies, and the services that provide. According to Marshan, these new services will include better debt management, budgeting, and savings tools than what has existed in the past.
“These tools will focus on providing customers with a clear picture of their entire financial position, in real time,” he told CMO.com. “This will give consumers better control, better viability, and a superior understanding of their whole financial position.”
The AIIA’s McCann agreed, saying open banking will lead to the development of new financial services and products to a broader range of customers and minority groups, including those with diverse incomes, smaller businesses, and those otherwise excluded from other financial services products.
4. Consumer Consent Is Critical
In a world where much of the customer data is currently centred around interest and intention, open banking is an enticing prospect for marketers in that the transactional data fills in a big gap–knowing when and where consumers have made a purchasing decision.
But it’s not a free-for-all just yet. It’s important that under an open-banking or open-data regime, consumers can provide and revoke their consent for data sharing in a clear, easily understandable way.
“Consent remains a critical component in the use and sharing of data,” McCann said. “Consumers must be able to provide, review, and revoke their consent for the use of their data in an easy manner.”
Ping Identity’s Perry agreed. “Companies that get their user consent processes and interfaces right will have a major advantage in the market,” he said. “Under open banking and the consumer data right, consumers will be informed in detail of what data they are sharing with third parties, and will be able to remove consent for that data sharing at any time.”
5. Open Banking Is Just The Beginning
The intention of the consumer data right, which starts with open banking, is that eventually data sharing and portability will spread across industries as diverse as healthcare, telecommunications, and utilities. Any industry that has a large stock of consumer data is ripe for digital transformation from the processes that begin with open banking. Industries where lock-in has traditionally been strong will see the arrival of new entrants, as well as the provision of new services.
“In the future, telcos, utilities, and other verticals will be able to use both the security model and the data access model being pioneered by open banking in their ecosystems. As with financial services, this will encourage an environment where new and innovative applications allow consumers to be more informed and have secure access to better products and services,” Perry said.
For APAC marketers, the time to begin thinking about open banking and the consumer data right is now. With the new rules less than a year away in some territories, there’s still time to prepare, research, and begin thinking about the new services and products that data portability will allow you to provide to your customers–both existing and new.
Credit: IDC Financial Insights