Posted: 23 Jun. 2020 10 min. read

Open Banking seven years from now

Open Banking is new for both consumers and the industry and the focus right now is just getting it up and running. It is difficult to imagine what it will enable a few years hence - a world that has the potential to be substantially different to the one we are currently in. Let’s go on a journey to explore what a day in the life of a consumer might look like in 2027.

Hussein is a secondary school history teacher living in Melbourne’s eastern growth corridor in a new estate. He and his gym instructor wife, Emily, have recently purchased a house and land package, and have a substantial mortgage with a non-bank lender.

On this Saturday morning Hussein and Emily are reviewing the family finances, which, thanks to the OurMoney* app, is now a painless process.

They can see transactions for all their accounts: two credit cards, a mortgage offset account and savings account, together with their loan balance and their separate superannuation accounts in one view. Most of these accounts are with different institutions.

The OurMoney app constantly analyses their income and spending patterns and provides helpful nudges to try and avoid financial difficulty. For example, just yesterday OurMoney sent them a message: ‘Hussein, I see that you didn’t fully pay off your credit card last month and so you are now paying a high rate of interest. Would you like me to draw down on your mortgage offset account and pay off the credit card so that you can reduce your interest cost?’

Hussein and Emily would like to go on a holiday in early 2028 to visit relatives in France, so they ask OurMoney to help them decide how they can make it work financially. ‘At present you have an excess income of about $50 per week. I note that you are each spending about $20 per day on purchasing coffee and lunch during the week, so if you were prepared to take lunch to work and drink instant coffee for the rest of the year, you will be able to save a total of $6,000.’

‘Would you like me to open a new savings account for you and transfer your coffee and lunch money to it automatically? I have found a new savings account from a neobank that currently has an interest rate of 3.2%?’

This example describes only how the consumer data right could impact how consumers experience banking. The underlying technologies all exist today and innovative fintechs are already developing apps like OurMoney.

In this world, the prime customer relationship is driven by apps that offer advanced analytics and AI technologies that help to make money simple for the 80% of the population, who, like Hussein and Emily, can’t afford a financial planner.

But open banking is just the start.  The consumer data right will include data sharing in energy and telecommunications and is likely to be extended to superannuation and many other sectors.  Payment initiation and account opening are currently being considered.

It could mean that banks, lenders and investment funds become wholesalers whose products are switched by smart AI engines to optimise a customer’s returns.

We encourage all financial institutions to spend time exploring scenarios like this and stress testing their current organisational strategies including their compliance, platforms, data governance and privacy policies, processes and offerings.

*OurMoney is a fictitious personal financial management app


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