Open Data and Open Banking

The advent of open data regimes is set to transform business relationships as consumers reclaim ownership of their personal information, and exercise control over who they share it with. Organizations will need to adopt innovative data strategies and gain the trust of their customers to meet the challenges associated with the evolution of data sharing.

Regulators support data access

The open data movement is gaining momentum as regulators across the globe continue to push companies and government departments to unlock customer information to foster competition, improve efficiency, and stimulate innovation. The European Union's Payment Services Directive, for example, is requiring banks to provide connectivity to other payment service providers to access customer data.

Australia's Consumer Data Right (CDR) legislation is also paving the way for consumers to share their banking data with accredited service providers, before the open regime is expanded to include the energy and telecommunications sectors. Open data can be seen as a potential threat to incumbent firms who have used the control of customer data to their competitive advantage, while acting as a boost for innovative companies that can leverage customer information in the development of new products and services.

Shared data to lead to better conversations, outcomes for customers

The drive for shared data is felt keenly in the financial sector, where banks are facing deadlines to boost data infrastructure and security in readiness for open banking. In Australia, the four largest banks will need to make machine-readable credit card, deposit account, and transaction data available to customers by July 1, 2019, with mortgage data to follow by February 2020. Other banks will need to be ready to share data by 2021. From there, open data regimes are expected to be rolled out to other designated industry sectors including utilities, health, and wealth management.

Open data's ultimate goal should be to ensure that customers get value from the organizations with whom they share their data

For adherents, open data's ultimate goal should be to ensure that customers get value from the organizations with whom they share their data, and not be overwhelmed with product-specific marketing, said panelists at a session on Open Data and Open Banking, part of the Financial Services Council Technology Workshop Series in Sydney. “Organizations can find it challenging to do customer relationship management (CRM) well," said Lisa Schutz, CEO of Verifier, a Melbourne-based fintech firm that helps lenders verify borrower incomes. “If you pull right back, the antecedent of this legislative change is the idea that maybe one day we could give people their data back so we can do a better job of giving them what they need. They might be able to have more engaged conversations with the market resulting in better outcomes. The focus narrows down to open banking, but the way the law is being drafted, any sector can be designated."

Incumbents will need to reassess their place in the new open ecosystem

This is about a change in mindset for the whole financial sector and charting a path in this new ecosystem

While the race to be ready to share and receive data is one challenge, the ability to remain competitive in a new open regime is another. Traditional data custodians, such as banks, insurers, and pension funds, may be faced with questions about their role in this new value chain and the shifting paradigm of the customer experience. With application programming interfaces (APIs) enabling efficient and seamless data sharing, fintech startups will swiftly acquire the building blocks to create new products and services, and the technological prowess to reduce delivery times to market. “Once APIs are embedded in an organization, its ability to partner and outsource directly for development on specific apps is accelerated. It moves to weeks, rather than months or years," said panelist Jamie Stevenson, Global Product Head, Data and Analytics  at RBC Investor & Treasury Services.

“This is about a change in mindset for the whole financial sector and charting a path in this new ecosystem. How will solutions plug and play together? How can they survive and reposition? These are questions for all participants, including marketplace providers and utilities. It's going to be a very different landscape in five to 10 years' time."

Tech giants such as Amazon, Alibaba, and Facebook may ultimately loom large over the landscape given the data they have already mined from their vast networks. Many of their users may have little concern about handing over their banking data as they already generously share locations, leisure activities, and social interactions. Moreover, where banks are under the pressure of government mandates to unlock their data vaults, the platforms have so far escaped designation.

“One sector that's not designated is PayPal, Alibaba, Facebook, LinkedIn," said Schutz. “If you want to see where the competition's going I would look to them. If you don't collaboratively share data now it's just going to get easier for the platforms to be more relevant to consumers.”

Gaining and retaining customer trust will be crucial for success in an open world

Even with robust, secure systems underpinning an open ecosystem, trust will be critical  to convince users to participate. Both corporations and regulators have much work to do to instill confidence in an era of cyber-attacks and high-profile cases of data mismanagement that have resulted in the theft or misuse of millions of users' personal information. Concerns about privacy, proper consent, and data discrimination are yet to be fully addressed. “A challenge which no one has fixed globally is how to say: ‘You can use my personal data for this primary purpose but then you have to delete it and you can't use it for anything else.' There is no language yet for that," said Schutz. “After consent, the next part is: 'Did you do what you said you did?' "

Concerns about privacy, proper consent, and data discrimination are yet to be fully addressed

Online consent is still at the basic level of “turning the tap on or off", which can leave users feeling they have little control over how and with whom their data is shared. When chains of consent are involved, consumers may not feel fully assured that their data has been revoked by all parties in the chain. There are also a number of ethical queries around whether firms can be relied upon to eliminate data bias that might result in more favourable products and services being offered to customers who share their data and less to those who decline to.

With the rise of machine learning and artificial intelligence tools programmed by algorithms, such concerns are salient. “How do we make sure that data models are not creating scenarios that are going to create a disadvantage for me or for others in my personal situation?" said panelist Melissa Ferrer, a partner in Deloitte's data analytics practice. Ironically, the grey areas could create business opportunities for firms to act as ‘data agents’ for customers, to ensure their personal data is not only secure but also shared optimally to enable better product and service delivery.

“You can certainly see a whole industry growing up around making it easier to manage your data," said panelist Michelle Lusty, Global Head of Product, Wealth Management at Bravura Solutions. “You can see the potential of managing all your consent relationships and services growing up around that."