A seismic shift
Open banking is about to unleash what has the potential to be a seismic shift in retail banking driven by regulatory changes, changing consumer preferences, and technology-enabled innovation. The evolution from a closed model, where each financial institution retained and controlled the information it collected about its customers, to an open model, has the potential to change competition in the sector and see the creation of new products and services based on that data.
The interim report on
On 9 May the Government accepted the recommendations of the Farrell Review and outlined a phased implementation timetable.
By 1 July
By 1 February
By 1 July 2020 major banks will need to make available data on all the products recommended by the Farrell Review (in Table 3.1 on page 37).
All remaining banks will be required to implement Open Banking 12 months after the timeline for the major banks.
For immediate focus
The 2018/2019 Federal Budget committed $44.6 million over four years to establish a Consumer Data Right (CDR). The CDR will be overseen by three government agencies. The Australian Competition and Consumer Commission (ACCC) will determine the sectors that will be subject to the CDR and will develop rules regarding its use and the required data standards. The Australian Information Commissioner will examine the privacy impacts, while the CSIRO will be the data standards setter.
Over the coming months the Treasury will be consulting on draft legislation, the ACCC will be consulting on draft rules, and CSIRO’s Data61 will be consulting on technical standards.
As open banking enables personal information to be shared between organisations, data privacy will become critical. The Farrell Review covers critical issues around data security, privacy and fairness. The growth of third parties in the provision of financial services is likely to impact financial crime risk management and reporting.
There will be opportunities to adopt strategic pricing, including risk-based pricing, as financial institutions more accurately model risk. However they will also need to thoughtfully consider the way in which pricing will take into account considerations around conduct and fairness.
The ability to effectively use customer data will be paramount. Banks will invest in artificial Intelligence, analytics, automation and algorithms and related capabilities to add value to consumers, and in application programing interfaces (APIs), to connect with a banking ecosystem.
Explore our open banking series below to help you prepare for the changes.
The evolution of an open banking model, where customers rather than each financial institution control and share their data, will potentially have a profound effect on financial crime risk management.
For years, discussions around APIs were confined to the developer community, but today they are the stuff of backyard BBQs, millennial games nights as well as
Open Banking is an ‘opportunity to re-shape how banks will deliver value in their financial products’. It promises substantial benefits in competition, innovation
Open Banking: Potential pricing implications
Information about a customer’s financial position and transactions
On 1 July 2018 a core component of Australia’s emerging open banking regime, Comprehensive Credit Reporting (CCR), will become mandatory. CCR, otherwise known as ‘positive reporting’, enhances the credit information provided by lenders and credit reporting bodies. This has the potential to enhance differentiation of customers based on risk.
Open banking is ‘one of the biggest changes in financial services in a generation’, according to American Banker magazine. The changes enabled by open banking and comprehensive credit reporting will have a significant impact for customers, data privacy and financial crime, strategy and pricing, conduct and fairness, artificial intelligence, and application programming interfaces (APIs). Financial institutions that fail to align their actions in all of these areas ‘risk getting left in the dust.’
Read more insights from our Deloitte experts around the world:
- Four key parts of the API economy (Deloitte UK)
- AI and risk management (Deloitte UK)
- How to create
defensiblecompetitive advantage in organisationsdriven by AI (Deloitte UK)
- The marketing opportunity in open banking (Deloitte UK)
Deloitte has a range of services to help