A seismic shift
Open banking is 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 Australian government has been moving towards implementation of the operating model and regulatory framework for open banking in Australia based on the recommendations in Australia in February 2018 (the Farrell Review).
For immediate focus
The Australian Competition and Consumer Commission (ACCC) will determine the sectors that will be subject to the Consumer Data Right (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.
As open banking enables personal information to be shared between organisations, data privacy, data security and consents will become critical.
Banks will need to ensure that they have an effective application programing interface (API) to connect with a banking ecosystem and enable data sharing, and the data governance and architecture which is robust enough to meet the data sharing obligations.
The ability to effectively use customer data will be paramount. Banks will invest in analytics and artificial intelligence and related capabilities to add value to consumers.
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 growth of third parties in the provision of financial services is likely to impact financial crime risk management and reporting.
Ongoing – Data61 consults on the open banking data standards.
August 2018 - The draft Consumer Data Right Bill was released for comment by the Treasury. Submissions were due by 7 September 2018.
11 September 2018 - The draft Consumer Data Right Rules Framework was released for consultation by the ACCC. Comments were due by 12 October 2018.24 September 2018 – Treasury releases the revised Consumer Data Right Bill for a second round of feedback, together with the draft designation instrument for the banking sector. Comments were due by 12 October 2018.
September 2018 – The banking sector will commence Comprehensive Credit Reporting, despite the legislation not yet having been passed in the Senate.
December 2018 – Draft legislation establishing the Consumer Data Right is expected to be introduced into Parliament.
December 2018 – The ACCC expects draft rules to be published.
1 July 2019 - All major banks will be required to make available to customers data on credit and debit card, deposit and transaction accounts.
1 February 2020 - All major banks will be required to make available to customers data on mortgage accounts.
1 July 2020 – All major banks will need to make available data on all the products recommended by the Farrell Review.
1 July 2021 – All remaining banks will be required to implement Open Banking 12 months after the timeline for the major banks.
Explore our open banking series below to help you prepare for the changes:
Data governance and architecture is a tightrope that organisations in the banking sector must navigate to realise the upside of unlocking information silos, and to protect themselves from potential threats in an open banking environment.
Artificial intelligence is already driving a dramatic shift in how financial institutions attract and retain customers. In an environment where customers are able to share their data, the ability to aggregate, manage and analyse data will become increasingly important.
By giving customers control over their banking data, and the ability to share it with third parties, open banking will transform banking in Australia. It has also generated a renewed focus on privacy. Open banking will result in more entities accessing banking data, and banking data being transferred more often – increasing the possibility that data privacy is compromised.
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
The end of September 2018 will see the four major banks provide the first component of Comprehensive Credit Reporting (CCR), effectively a component of Australia’s emerging open banking regime. CCR, otherwise known as ‘positive reporting’, enhances the credit information provided by lenders and credit reporting bodies. This has the potential to enhance
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:
- Submission on the Consumer Data Right Rules Framework (Deloitte AU)
- Submission to Treasury on the draft CDR Bill (Deloitte AU)
- 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)
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