"CES 2019 was the most boring CES in recent memory" - so what was all the hype about?
Right now your financial data is locked up behind closed walls owned by one of the Big Banks and the only way you can get it is through a door they open and control. This is the reality for most banked people here in Australia, and in many countries around the world.
As people become more savvy in an ever connected world, there comes a time when they expect the same level of access to their data from a bank as they can expect from their social tools. The tech folks out there go a step further and ask for APIs for their own data.
I love @CommBank, but if you folks had a consumer API for my accounts (even if it was read only) that would be ace... hint hint...— Jack Skinner'; -- (@developerjack) February 26, 2017
In July 2017 the Australian Government commissioned a review to look into Open Banking with expected outcome being a recommendation around the right model to bring open banking to Australia.
Open banking is a revolutionary technology that will radically change the way we interact with and use financial services. Xinja.com.au
So what is open banking?
In a nut shell, Open Banking is the first implementation in the Governments Consumer Data Right initiative, it is your right to not just access, but also control the data any generated by you as you interact with a company. So any interaction you have with an energy, telecommunications or banking business that results in them storing information will need to be accessible by you or another service on your behalf. Open Banking will allow you to safely and easily see and use your transactional data in other services.
But I can do that now?
Well yes and no. Startups in the financial services space who have built out great tools to help you budget, track funds, auto-roundup for savings, micro-investing and loans are often using unsafe screen scraping technology such as Yodlee. In order to use a tool like this you must hand over your login details - something you should never do.
The problem with that is users are giving that software tool full access to their accounts. They could do what ever a user can do through the bank website (pay bill, transfer money, close an account). Open Banking will bring to the market a safe way for a user to grant permission for a tool to read, or read and write to their data. This is very similar to how a user connects a service to Facebook, granting permission to key components of their data. Open Banking will put the user in control of the data, and allowing them to say "Yes you can read my data - but you can not update or edit my data".
Innovation and transparency
2017 saw an increase in news articles highlighting closed door practices of some of the big banks and customers being ripped off. This happens when the barrier to entry for an potential disruptor is so high. Open Banking will make it easier for startups (disruptors) and new businesses to enter the market, bringing with them new innovations that will challenge the existing providers.
Open Banking will do for the banking industry what AirBnB and Uber have done for the hotel & taxi industries. Closer to home look at MYOB, Xero and Intuit and the incredible ecosystem of business tools that have built up around their open data APIs. Hundreds of new businesses growing, jobs created and many thousands of businesses gaining efficiencies through smart connected tools sharing data.
The ability to review financial data from all banks and providers in one place, then have fair and open recommendations on how to clean up debt, create wealth, improve investments, save on fees and gain better returns is enticing, and will lead to a more financially aware population.
There are still questions
As great as open banking is there are still a lot of questions around the final implementation. Australia's recommendation has been submitted and teams are working now on finishing the standards. All eyes right now are on the UK where their Open Banking came into play in Jan 2018. There are a lot of opportunities to learn from what Europe and the UK have done in this space, particularly when it comes to security.
This week RareBirds ran a breakfast event focusing on Open Banking, bringing together over 150 people all keen to ask questions and learn more. Focusing on conversation around the burning questions, with experts from the field (startup disruptors already pushing the boundaries in the financial data space) sharing their insights and answering questions.
The conversations however tended to focus in on some key topics:
- Trust of identity: As one speaker put it "how can I know that individual A over 'here' is the same person being identified over 'here'" - how do you know that person A from this ANZ data set is actually person A from this CBA data set? This will also be made more complex when coming to joint accounts, power of attorney and areas where identity ownership is passed on to another individual.
- Implied authority: In a similar vein to identity is the authority of access or use of the data. In the world of financial advisory the situation arises when a user grants an advisor access to review their data. The advisor then uses Software A to connect to that data, but the customer may never have granted permission - the advisor has. Does a customer have the right to know what tools or solutions the advisor has connected to their data? What happens when a customer changes advisor and how do they know all the tools used no longer have access to their data?
- Trust of data: Data will come in from various sources and each of those sources will have their own way to verify the accuracy of that data. When this data is aggregated into a new tool can it still be trusted? This could be as basic as comparing apples to apples rather than oranges, but it could also be that data in specific instances has different meanings of validity. You only have to look at items that carry GST and can or can not be a tax write off to realise the situational context of data is as important as the data itself. Can the service using banking data be trusted to use it in the right context?
- Security: When a user connects a service to Facebook they can find a list of all apps in the Apps settings area. From here an apps right to access data can be removed. When it comes to Open Banking will a user be able to find a list of all services consuming their data? Will they be able to stop any/all services easily?
- Competitive Insights: What happens when bank A realises a customer is sharing data with bank B? On one hand bank A might now sharpen up their prices and offerings for the customer providing a better service. However there is the risk that bank A might also use that data to the detriment of the customer. Ultimately Open Banking should result in a better service for customers.
Talk to any business in the financial services space (particularly startups) and they can't wait for Open Banking. There is a palpable excitement building in the fintech industry in Australia as this immense data set is unlocked and true innovation can happen.
For consumers it will create opportunities to improve their cash flow and financial understanding not to mention they will receive better services that fit their exact needs. For businesses it will improve the speed and efficiency of offering a service to customers. Anyone who has been to a financial advisor and had to prepare statements, banking history and more will understand the ability to login and grant permission will streamline this process immensely.
The other huge opportunity is in the ecosystem of tools being created that will leverage this data. Startups will blossom, businesses will grow and jobs will be created.
Open Banking in Australia 2018 is going to be huge, for all the right reasons. Bring it on.