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‘Open banking consumer experience critical’

01:28pm March 26 2019

Ross Sharrott, who co-founded Moneytree with Paul Chapman and Mark Makdad in 2012. (Emma Foster)

Ross Sharrott, a member of the advisory committee assisting with the standards for the nation’s incoming data sharing regime, says the focus has shifted to how consumers experience “open banking” in the real world to ensure the public jump on board and see the benefits. 

The co-founder of Japanese fintech Moneytree, which launched in Australia in 2017, said the bulk of the technical standards to underpin the “Consumer Data Right” (CDR) – which will give consumers greater control over their data, first through “open banking” – had mostly been agreed. Cementing the first iteration of the standards for the CDR – being designed by the CSIRO’s digital research arm Data61 – would mark a notable milestone in the rollout of open banking, which kicks off from July 1 with the big four banks publicly sharing product data about credit and debit cards and transaction accounts, before being expanded to other products and financial institutions over time. 

“There’s not going to be sweeping differences between what’s there and what eventually comes out, most likely. So what we’re really focusing on now is the consumer experience piece of it,” Tokyo-based Mr Sharrott said last week on a trip to Australia following the release of draft standards late last year. 

“What they’re going to see, … how they’re going to say ‘yes I approve’ (etc). 

“I think the actual standards themselves are good…it’s a good version one. It will evolve. So, it really comes down to the consumer experience and then building trust with consumers by really bringing products to market that have value.”

The comments come as open banking gains momentum following the Senate Economic Legislation Committee’s backing last week of the CDR Bill. Industry and regulators will discuss next steps this week at a Criterion Conferences open banking event in Sydney, including striking the right balance between security and innovation, and lessons from other markets such as the UK and Europe. 

The experiences of a less commonly discussed market is Japan, which also implemented open banking in the past few years. Mr Sharrott said Australia’s approach with the CDR was “way broader and more ambitious” than the approaches in Japan and most countries, given plans to roll it out across other sectors like energy and telecommunications after banking. Also, Japan’s approach had been more “industry-led” than legislated, he said. 

Signage of some of Japan’s largest banks in Tokyo. (Getty)

However, he tipped Australia’s regime to take off faster given the “running start” and that every financial institution will ultimately have “Application Programming Interfaces”, or APIs, with minimum capabilities for companies to share data under the oversight of the Australian Competition and Consumer Commission.  

“(In Japan) it’s a little bit more you still have to go talk to a bank there (after being accredited), whereas the idea here is as long as you’re registered with that central body, the ACCC, you can access. So it’s a little bit different but the fundamental outcome is the same,” he said. 

“(But) the proof will be in pudding, as they say, where really are people using it? That matters a huge amount. What’s happening (in Japan) is they’re using open banking … but they’re not going to say the words open banking or CDR or whatever. Those are policy terms.

“The consumer is trying to do a thing. They’re usually not trying to say ‘I want to use open banking’. (So) I think the really interesting thing about open banking is going to be once we kind of get past that first wave of things and we start to look at more narrow innovation, more focused on a particular job to be done for the consumer. As long as the system is built in a way that is easy enough to use and trustworthy enough to use, they’ll start using the products built on top of it.”

For banks, open banking is viewed as both a potential competitive threat and opportunity as data becomes increasingly available due to improving technology and other policies like Comprehensive Credit Reporting. 

In its submission to the Senate Economic Legislation Committee, the Australian Banking Association was supportive and noted benefits, such as the potential for more tailored and innovative products, but raised issues around timelines, reciprocity and value-added data. Consultants at KPMG say it’s critical for financial institutions to be “flexible” in their approach and that opportunities will exist for those that see it as “more than a compliance requirement” given the eventual broadening to other industries.

“The open data opportunity, while in its nascent stages globally, is already predicted by McKinsey to generate in excess of $3 trillion in economic value annually across major industries, solely based on the impact of availability of data alone,” Danny Gilligan, the co-founder of venture capital group Reinventure, wrote in recent piece on data and policy

“It’s clear the upside is immense.”

In Japan, Mr Sharrott’s data platform and application fintech Moneytree uses open banking APIs to gather data – rather than robotic process automation previously –  and partners with several banks, such as Mizuho, to offer enhanced products like apps which allow customers to view accounts held with other financial companies. Accounting firms also use it to access clients’ financial data. 

Japan’s Mizuho has used Moneytree’s technology. (Getty)

Moneytree, which counts some of Japan’s largest banks as investors, is seeking to ramp up partnerships in Australia after first launching its personal finance app in 2017 and is in talks with “several” players. Mr Sharrott said Japanese banks increasingly started to think more strategically about open banking over time after initially focusing on compliance and expects similar shifts in Australia, including how it could improve credit decisions. 

“That’s sort of a mental shift that needs to happen within each institution...and here in Australia obviously because we’re a little bit earlier in that piece… different institutions are at different stages of that thinking,” he said. 

“We really think about how you are going to add value to the consumer so they want to give you access to their data, because that’s still the number one rule of open banking – the consumer has to say yes. So the big mental shift has to be ‘OK, I have to say to the consumer why I want their data and they have to agree that it’s worth it for them’.

“The reason why it works well is it puts the consumer into that decision where you actually go ‘I want what this product is providing and I’m willing to give access to my data because I want that value’ and it makes that a much more transparent experience.” 

Michael Bennet was inaugural Editor of Westpac Wire from June 2017 to December 2021. He joined Westpac after more than 12 years in journalism, most recently at The Australian as the national newspaper’s banking reporter based in Sydney. Michael has worked at various News Corp publications and other media companies covering industries including financial services, resources, industrials, markets and economics. He is originally from Perth, Western Australia, where he also wrote across magazines covering the arts with a focus on music.

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