Let’s talk about Open Banking
Our Regional Director for Australia and New Zealand, Mathew Demetriou, discusses what businesses in APAC and beyond, need to know about Open Banking rules.
New ‘Open Banking’ rules were introduced in January 2018, to empower consumers by reducing the burden and cost related to switching bank accounts.
Under Open Banking rules, financial institutions must use open APIs, meaning an individual’s data can be shared safely between other finance companies, once the individual has given permission for this to happen.
This provides customers with more control and stability over their financial data, allowing them to make educated decisions about which financial products are most suitable for their needs.
Whilst much of the public discussion around Open Banking so far has been around the banking industry, the benefits will eventually translate to other sectors including telecommunications, energy, health, insurance and superannuation.
So how should you help prepare your organisation for Open Banking?
- Trust is key
Whilst large tech companies such as Google and Facebook have been leveraging the huge value in personal data for years, consumers are now starting to realise this too and treating their own data as an asset.
It’s vital that organisations build and maintain trust with customers, as they increasingly demand their data is responsibly managed and distributed by their financial services institution or any third-party organisations.
Customer adoption to new products and solutions may be slow whilst they navigate the new rules. It’s important to relay as much necessary information to the customer so that they feel as comfortable as possible with the process.
- Internal Processes
In terms of process, businesses should prepare for the challenges in consumer thinking by formulating a liability model. I recommend this be in alignment with the PSD2 (Second Payment Services Directive) which recently came into effect in the European Union (EU).
PSD2 is a collection of laws and regulations set to create safe and secure online payments and to broaden the financial services environment, whilst making banking data available to third party organisations.
It can be used as an international standard that sets a global benchmark. Financial institutions outside of the EU can use this as a guideline when defining their own policies in region.
- Technology and Development
The freedom and flexibility that comes with Open Banking has created an arms race for Fintechs to create platforms that are fit for the future.
When new products and solutions are created, they need to be scalable across different markets and interoperable. This is driving innovation in the industry, as Fintechs are using the open APIs to secure their place in the market.
Staying up to date with current trends will ensure you’re always ahead of the pack.
Whilst the benefits of Open Banking for consumers are abundantly clear, businesses can also gain momentum from it. For example, if a customer asks their bank to share data with another service provider, this could encourage the creation of new types of products and services, which improve convenience and choice from business to business.
Although some incumbents may see this as a threat, they too could benefit. They just need to find ways to use open data to improve customer experience and the breadth of services, rather than purely providing channels to share data.
Ensuring compliance is paramount; as is remaining transparent on how customer information will be used.
If you'd like to understand more about how we can help your business remain compliant and competitive in light of changing regulations, whilst fighting financial crime, see here for more information.