Open banking


Open banking

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.

In the UK, the first nation to launch open banking, the new laws commenced on 13 January 2018.

In Australia, the interim report on implementation of an open banking regime was released in February 2018. The review, undertaken by Mr Scott Farrell, a partner with King & Wood Malleson (the Farrell Review), provides recommendations on the design of the operating model and regulatory framework for the introduction of open banking in Australia. A component of open banking, Comprehensive Credit Reporting (CCR), will be introduced on 1 July 2018.

The Farrell Review covers critical issues around data security, privacy and fairness. As open banking enables personal information to be shared between organisations, data privacy will become critical. 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 programming interfaces (APIs), to connect with a banking eco-system.

We are exploring many of these topics in this open banking series.

Deloitte has a range of services to help organisations get up and running with open banking. We can assist organisation’s assess the impact of comprehensive credit reporting and evaluate strategic pricing options. We help them navigate the challenges of conduct, privacy and financial crime compliance. We help them develop their data strategy and amplify their actions on artificial intelligence, analytics, automation and algorithms. And as organisations prepare for the exploding API economy we can help them develop the vision for an organisation’s open banking strategy, the development of propositions based on customer research and testing, integration and developing of API platform scaffolding including platform and security architecture, and design and build of APIs to support open banking delivery.

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Published: January 2018

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