Open Banking is scheduled to begin in July but its benefits won’t be felt by most consumers for at least two more years, according to Robert Bell, CEO of 86 400, a neobank involved in the current testing phase.
Bell told Which-50 that 86 400, which already uses customers’ external data in its financial products through a mix of screen scraping and document scanning, is a “really big supporter” of the Consumer Data Right (CDR). The first test of the new legislation is Open Banking – the regulator-led scheme that will allow customers to transfer their financial data directly between banks and fintechs via APIs.
“There’s a lot of hype about the immediate benefits from Open Banking and the reality is the benefits from Open Banking will take longer than people expect,” Bell said.
Open Banking has been delayed several times already and is currently scheduled to begin in July this year with the big four banks required to make some customer data available.
However, the latest comments from Australia’s largest bank, CBA, suggest the current COVID-19 situation could push the start date back again.
Bell says even with a July start it will take two or three years more for benefits to flow to consumers because of the scheme’s staggered roll out and the technology challenges facing incumbents, which are also juggling other technology projects and “conflicting priorities”.
“Assuming that the four big banks meet the July deadline – which is a pretty big assumption – that’s only a very limited subset of data from four financial institutions. So that’s a long, long way off having a comprehensive set of data that would be really useful.”
86 400 is one of a handful of organisations currently testing the data portability scheme along with Australia’s big four banks.
“We have put disproportionate resources into that [testing phase] relative to the size of our company because we think it’s the right thing to do for Australians. It’s the right thing to do going forward.”
Bell declined to comment on whether the fellow Open Banking testers had shared that enthusiasm or had a similar experience during the testing phase so far.
86 400 already allows customers to incorporate data from another bank into its platform, for example, to show account balances from other banks within the 86 400 app. To do this the bank uses screen scraping, a practice where customers give one bank or fintech their log in credentials for another to collect financial data.
Industry incumbents have fought to have the practice banned, arguing it goes against fundamental security protections. CBA, for example, has been advising customers that allowing screen scraping on their accounts is unsafe and a breach of its service agreements. In response, fintechs have accused Australia’s biggest bank of engaging in anticompetitive behaviour.
Last month financial regulator ASIC said they had no plans to interfere with screen scraping.
Bell says 86 400 only ever uses a read-only function – it can’t make transactions on a customer’s behalf – and customers can opt-in or out at any time.
Ultimately open banking should make screen scraping redundant because API based transfers will be easier and safer, a view Bell agrees with. But for now, he says, screen scraping is delivering customers value.
“Our experience with screen scraping is it provides enormous customer benefits right now, and that’s why we’re doing it.”
Bell says he is comfortable with 86 400’s security and the partner it uses for screen scraping. He also says customers are telling the bank the feature is proving very useful.
The digital-only bank also offers an additional energy service where customers can upload their latest bill, which is then analysed, hopefully to find cheaper alternatives for the customer. While online energy comparison tools already exist, Bell says 86 400 goes further by using data from actual bills rather than estimates and offering three alternatives which can be initiated immediately.
86 400 does not charge a commission for the service. Bell says the value for them is greater awareness and advocacy for the new player.
“This is purely something we’re doing to help customers save money. And it’s something we’re doing obviously to create that great advocacy for a bank that’s really different. So that people will talk about us and tell their friends about it.”