Published on the 11/10/2018 | Written by Heather Wright
Europe may have the jump on open banking, but A/NZ might just get it right…
Australia will lead the world in defining citizen data rights and define best practice around data ownership, with New Zealand on track to lead conversations around extending payment capabilities.
Michael Araneta, IDC Financial Insights Asia/Pacific vice president, told iStart this week that while many, including the banks themselves, view open APIs as the crucial component of open banking, that’s not IDC’s view.
Instead, Araneta says open banking – which provides a standardised and secure framework for sharing customer data with trusted financial service providers – is made up of three pillars, or areas of transformation for financial organisations.
“Australia will define the best practice worldwide with regard to customer data.”
“Firstly, there’s the issue of the control of data – data ownership and data rights – where I think Australia will stand out. Secondly working with the fintech providers, especially in the area of payments which is where NZ will stand out, and then the open API concepts, especially around that monetisation of open APIs.”
In theory, open banking will enable customers to control their data, including having it sent to other authorised organisations, and should allow for a range of new financial services. Among the examples provided by the Reserve Bank of New Zealand are options to enable restaurant bills to be split and paid automatically using mobile apps, or timely and personalised budget advice provided to customers when they enter a shop.
Europe has already begun its – regulatory driven – move to open banking, while Australia beginning a phased introduction starting with the big four banks beginning with credit and debit card, deposit and transaction data in July 2019.
Araneta says Australia is already forging a leading position in the first arena of data ownership.
“Australia will probably lead the world in terms of defining citizen data rights – who owns and controls and manages the data,” he says.
Banking is the first Australian sector to be overhauled under the impending Consumer Data Right rules, which sees consumers ‘owning’ their data with open access to transactions and the right to control who can have and use the data.
“Financial institutions must now recognise that data isn’t owned by them, but rather by the customer and they are just the repository for the data,” Araneta says. “That’s a very strong component of the Australian policy and I think a lot of the identity and access management, the conversations around authentication and control of data will be defined in Australia. They will define the best practice worldwide with regard to customer data.”
Meanwhile, Araneta says New Zealand is already forging ahead on the second pillar of open banking – working with fintech and third parties, particularly on the payments side.
“This ecosystem that is being built by the banks will allow financial services to be extended by the third parties to the consumers themselves and this is a strong area of capability that is being developed.
“There is a strong component of payments that will be a strong theme that will be pursued by New Zealand and this is where NZ will be quite prominent in the open banking conversations.”
He notes the work of Kiwi governance organisation, Payments NZ, which governs New Zealand’s core payment systems. In March, Payments NZ began a pilot project with ASB, BNZ, Westpac, Paymark, Datacom and Kiwi online trading site, TradeMe, to develop two payment related APIs to pave the way for safer open banking.
“There are a lot of initiatives coming from Payments NZ and that’s a good thing. This is a best practice for how an industry is supposed to come together, define the terms of how they are supposed to work together, define the technology standards but also the operating model for how exactly the fintech companies are going to work with traditional providers of data or traditional providers of financial services.
“That’s a very strong contribution of NZ to the open banking dialogue.”
Last month cloud accounting software company Xero announced an open banking API, providing secure integration between Xero and financial organsations, and enabling financial organisations to provide customers with near-real time reconciliation in Xero.
Araneta says there could be strong spinoffs for Kiwi fintechs, with the opportunity to test offerings here and then move into the wider region where payment standards are yet to be defined.
The third step in the open banking journey is open APIs, with Arenata noting that’s a ‘very fundamental discussion for a lot of organisations moving forward’.
“They have to establish this data pipeline in and out of the organisation. To be able to acquire, but also to push out data to a third party, banks will have to invest quite a bit in technology.”
With that cost in mind, banks will also be looking to monetise their open API offerings, something he says will be a very difficult journey.
“You will have to have some understanding with third parties first about who has control of the data pulled together, what is the value we are giving to the customer – is it personal, more real time offers, is it a product or goods – and therefore who provides that service or good in the first place.”