The Federal Government will phase in open banking with all major banks making data available on credit and debit card, deposit and transaction accounts by 1 July 2019, and mortgages by 1 February 2020. Data on all products will be available by 1 July 2020. While all remaining banks will be required to implement open banking with a 12-month delay on timelines compared to the major banks.
Open banking allows customers of the Big Four banks to access their own data through approved third party apps and programs using application programming interfaces (APIs). For example, a client’s accounts could be analysed using sophisticated tools that predict spending and saving.
Artificial intelligence and active communication tools like chatbots and push notifications are also expected to feature strongly in new financial products.
The opportunity for advisers
Open banking is a global revolution in financial services that kicked off in the United Kingdom in January 2018, leading to an upsurge in fintech offerings that will demand financial advisers place an even greater focus on technology than now.
It’s an opportunity to be better engaged with clients, says Ben Marshan, Head of Policy and Standards at the Financial Planning Association of Australia.
But you’ll need the systems and processes in place to take advantage of it, he says.
“In a current advice process that can take 20–26 hours, there’s probably a good four or five hours of collecting data manually and re-entering it into existing systems because the technology isn’t there to link the systems up,” Marshan says.
“With open banking making everything open and transparent, you could do that automatically, so you’ll save massive amounts of time.”
Having access to aggregated customer data that’s presented in a user-friendly format is likely to “significantly improve” the advice process, according to the UK’s Professional Adviser magazine1.
“We could, therefore, see a seismic shift in the ability to better understand customers by having access to ‘real’ and relevant data while reducing costs-to-serve through the introduction of technological efficiencies into the data gathering process,” it reads.
The Consumer Data Right
Open banking is the first stage of implementing the Consumer Data Right, a Federal law that will give Australians improved access to their own data and allow them to transfer it securely to trusted third parties. The Consumer Data Right will be next introduced in the energy and telecommunications sectors, and then rolled out to cover all products and services.
Open banking is based on four key principles, says Choice magazine2. “The first of which is, ‘It should be for the consumer, be about the consumer, and be seen from the consumer's perspective’". (The other three principles are to encourage competition, create opportunities and be efficient and fair.)”
The access to data will allow financial advisers to get a better understanding of a new client’s goals and objectives, says Marshan.
“So, the time you’re spending with the client is about building the relationship, coaching, educating and building much higher levels of trust because you don’t have to be wasting time moving data from pieces of paper into systems.”
Down the track it gets “really exciting”, says Marshan. “You can have live data feeds coming from the open banking data, and you’re able to track the client’s position against their goals and objectives, allowing more frequent updates or changes.
“You’re a trusted partner, somebody who is actively working with your clients to help them through their financial position rather than meeting every six or 12 months for a review.”
Open banking: next steps
It goes without saying that 2019 is going to see some huge shifts in the financial services sector. Apart from the introduction of open banking, there’s also the transition to the new FASEA (Financial Adviser Standards and Ethics Authority) standards.
“It’s critical to have a look at your business and advice processes, and make them as efficient as possible,” says Marshan.
“There’s going to be a lot of regulatory change, additional cost and time taken up with education and new professional standards coming through. Doing business the way you have been for the past five or 10 years is not going to work over the next two or three.”
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Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Ben Marshan is external and not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Ben Marshan does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties their products, services and material. Past performance is no guarantee of future performance.