The introduction of the consumer data right, which underpins open banking will make it easier for consumers to switch banks, but that will not be without cost to incumbents and insurgents alike.
That’s the view of Michael Ewald, director of engineering and consulting APAC Contino, an Enterprise DevOps and Cloud Transformation Consultancy.
He told Which-50, “For banks, the CDR provides an opportunity to innovate, collaborate and improve the customer experience. Conversely, the CDR creates challenges for banks like data management and privacy, consent management, competition and increased pressure to evolve infrastructure in order to meet regulatory demands and keep up with digital-first competitors.
Ewald also said that when it came to the opportunities of open banking, the smaller banks have the advantage as incumbents have to give up elements of those precious data assets.
“The incumbents have to focus on innovation and demonstrate customer value to retain them or avoid losing further market share.”
He warns that there is a real risk that those that don’t use the CDR to innovate will become utilities, providing money-moving rails.
“Whether a bank or fintech, the winners at the end of the day will be those that use the CDR to offer new customer-centric, competitive, profit-generating products and services.”
Time to value
While the formal introduction of open banking has arrived, there are mixed opinions about how long it will take for tangible CDR benefits to flow to consumers.
Ewald told Which-50, “As with any large scale transformation, end-user benefits take time to be realised. First, the CDR must be successfully implemented, along with the necessary infrastructure to innovate and improve the customer experience.”
The other key consideration is consumer education, he says. “While the CDR and open banking have been spoken about at length by those in the industry, the reality is most Australians don’t know what open banking is.”
He cited a survey conducted late last year of 1,000 Australians which found more than three-quarters are basically unaware of open banking.
The same survey also revealed that consumers have concerns around areas like data security and cost–however ill-informed these may be. “The industry and consumers won’t reap the benefits of the CDR until there is widespread understanding of what it is and its value.”
“Furthermore, we won’t realise the full potential of the CDR until it’s rolled out to other sectors, like energy and telecommunications. Once we’ve reached this stage, the CDR will create opportunities for providers–whether of financial, telco or energy products services–to aggregate data, products and services from competitors and even other industries, essentially creating a digital marketplace,” he said.
Ewald offered an example of the kinds of services that might energe. “Imagine a bank that doesn’t want to simply sell you its products and services, but instead helps you to manage your finances through third party integrations and aggregates best-in-class products and services from its competitors. Now imagine your bank is integrated with your telco, electricity and gas providers, super fund, insurer, entertainment services and retailers that you frequent–you can access and use all of these services from the one interface or platform. These are the “marketplace” opportunities created by the CDR.
Compliance is obviously a key concern for many banks, he says however, he argues that forward-thinking banks should CDR as an opportunity to innovate.
“Many banks are seeing the benefits of public cloud to initially accelerate CDR compliance and, in the long-term, transform their business models.”
This is because, he says, cloud-hosted platforms help banks get their solutions to market faster, as well as being inherently more scalable, robust, secure and far easier to iterate than anything delivered by a traditional data centre infrastructure.
“From those customers that we have helped to adopt a cloud-native or cloud-first approach, it has led to faster, safer and more cost-efficient rollout of new features.”
As a consultancy that works with many of the big banks in Australia and globally, Contino sees a connection between open banking and banks adopting new ways of working, such as DevOps, says Ewald.
“By breaking down silos traditionally found between software development and IT teams and adopting a collaborative approach, banks will benefit from faster software updates, the ability to solve critical issues quickly and agile ways of working.”