Welcome to the shared economy. We regularly use things we don’t own: cars (Uber, GoGet), holiday homes (Airbnb), and even time (Airtasker), but it’s not one-way traffic. Soon, we’ll own what we’ve always given away – our information.
There’s a global shift to open data underway and it’s set to reshape financial services and turbocharge innovation across the growing fintech sector.
The UK government
and the European Commission have already taken bold policy steps to empower citizens and strengthen their ability to easily shift their business. FinTech Australia chief executive Danielle Szetho says Australia is now on the same path.
“The notion that consumers should be put in control and given the ability to direct institutions to share their information – as long as the third party overseeing the process is a registered entity – has now been widely accepted,” she says, noting that ASIC is well placed to play the role of trusted data facilitator between entities.
The Productivity Commission has made several positive recommendations in a recent report
while a lower house government committee
last year recommended banks make their customer data available to other institutions by July 2018.
Innovation ahead but not without challenges
However, there are several key challenges.
While open data can make information more accessible, standardised open APIs (application programming interfaces) are widely seen as the best means to allow that information to be easily and safely exchanged between organisations. That process may be costly to implement, although many major banks are now testing open APIs to share public information with developers, such as at NAB’s recent Hackathon.
“A lot of the other banks are running programs to test what that might look like and how the data might be protected,” Szetho says.
If open APIs become commonplace (as recommended by the government committee), the typical six to nine months it currently takes to set up and run a pilot between a bank and a fintech firm could be slashed.
“That way banks and financial institutions can try a product and see if it works and make decisions quickly to see if it’s something worth co-developing further,” she says.
A range of open data innovations are likely to find a receptive audience because they offer time saving and convenience.
For example, Australians could complete online tax returns with the bulk of information auto-populated. RegTech (regulatory technology) powered by open data could help many existing businesses simplify and lower the cost of compliance, which would ultimately boost productivity. Currently, there’s no way to share Know Your Customer (KYC) requirements between organisations (another hurdle for customers wanting to switch providers).
Open data gains widespread acceptance
While open data will foster competition, it will also promote innovation – and deliver profits to those banks and fintechs that offer new value for customers. It’s an opportunity too big to be ignored.
“It took some time for a lot of different groups to get their head around exactly what open data meant for them but the message is really positive and consumer-focused,” Szetho says. “There’s no-one who could really disagree with it.”
Moneysoft head of operations Jon Shaw says legislation endorsing open data would propel the fintech sector to new heights by legitimising data sharing.
“A lot of inefficiency now is around risk protection, mitigation and writing contracts – a standard regime for data sharing would be a huge boost to B2B efficiency because everyone would know the data is coming from a trusted location,” Shaw says.
Moneysoft’s cash flow service, used widely by financial planning dealer groups, relies on bank feed data, while the company is bringing a number of new innovative services to market.
"Open data will also massively expand fintech innovation so while the banks might be reluctant to share it initially, it will ultimately benefit them because they can acquire new and innovative technology”
There is still a long way to go although Australia’s big banks are increasingly backing the movement. Westpac chief executive Brian Hartzer told a House of Representatives economic committee
that the bank supported open data and was “relatively agnostic” about who leads and facilitates the process.
“What we found is that while you might, in the first instance, start with this view that giving access to data would be a risk, we are actually finding it is creating new opportunities for us to create better services for customers,” according to Hartzer.
“So we think that embracing innovation, particularly around data, is very important. In fact, Westpac has been an early investor in something called Data Republic, which is a start-up that is specifically around how do you share data among companies in a way that privacy security rules are addressed?”
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