Open banking is being rolled out across Australia over the next year as a response to the lack of competition in Australia’s banking sector. The scheme, which will force banks to release customer data, is potentially a serious threat to Australia’s incumbents.

The Big Four, however, also have a golden opportunity to not only access new data streams from competitors but also use it in the design of new services, according to a new whitepaper from Pegasystems.

The research suggests while open banking theoretically encourages new entrants and intermediaries, if established banks move quickly they could be the big winners in open banking by delivering many of the services themselves.

In August, Parliament passed legislation to enable a Consumer Data Right in Australia, the data portability scheme which underpins open banking. The legislation means open banking is likely to begin in earnest in February next year.

At that point, if regulators are confident in the scheme, consumers will be able to request banks share their data via APIs. The obvious winners are fintechs and smaller banks, which can offer new services and remove much of the friction of  switching respectively.

The Pegasystems report finds, however, there is nothing really stopping banks from offering these services and experiences themselves, as has happened in other countries already.

“Incumbents can leverage Open Banking to cement their positions, and to provide new services themselves either through white-labelling, strategic partnerships or in-house development,” the report says.

“Indeed, with the advantages of scale and resources they can build the same services fintechs and neobanks are currently clamouring to develop, but under their own brand.”

Time to prepare

The big four have already been piloting open banking and have known it was coming for years now.

“From a large bank perspective, I think Open Banking helps us validate our conclusion, that I think is broadly held amongst financial institutions, that our business model can’t stand still,” ANZ’s Banking Services Business Domain Lead, Nigel Dobson in October last year before open banking was delayed another eight months.

Australia’s largest bank, CBA, is even looking beyond financial services thanks to the data portability enabled by Australia’s Consumer Data Right, which is expected to be extended to telecommunications and energy sectors.

“When the telecommunications and energy sectors are brought into the CDR regime, the possibilities are so much greater for consumers to optimise the way they spend and save,” Commonwealth Bank of Australia’s General Manager Digital Banking, Kate Crous, told Which-50 in July.

Crous gave the example of a mature CDR scheme allowing companies to help consumers analyse energy consumption data and recommend ways to reduce cost like solar panels. She said the same company could then “seamlessly” help finance the purchase.

“For us, it will provide an opportunity to continue to innovate, and focus on improving the financial wellbeing of our customers through digital channels.”

About the author

The Which-50 Digital Intelligence Unit produced the Open Banking Whitepaper for PegaSystems, which is a member of the Which-50 Digital Intelligence Unit. Members provide their insights and expertise for the benefit of the Which-50 community. Membership fees apply.

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