Australia’s banking sector is set to undergo significant change with the introduction of new Open Banking regulations, changing the dynamic between banks and their customers, a new report by PwC Australia says.
With the federal government committing $44.6 million in last week’s Budget to establish Consumer Data Right (CDR), a necessary building block to introduce Open Banking in Australia, PwC’s report, Demystifying Open Banking: What it means for bankers and for Banks, highlights that every function in a bank has a role to play in preparing for an Open Banking future, not just technology.
The reports finds that so long as Open Banking is done securely, unbundling bank services and data in this way can create greater competition, greater efficiency, greater specialisation and scale, and of course enhanced or entirely new products and services.
PwC Australia Banking and Capital Markets Leader Colin Heath says unbundling and recombining bank services creates the possibility of entirely new business models.
“The benefits to banks will be more data, better decisions, greater access and better services for their customers,” Mr Heath says.
“The benefits to the customer include more competition, better advice, better products and a greater ability to switch banks with ease.”
At the same time, Mr Heath cautions that while the long-term change to come is likely greater than anyone can at this point imagine, there is an enormous amount to be done on what he calls both the ‘technical’ and also the ‘social’ infrastructure before that can happen.
“We won’t go from sharing transaction data to the ‘API economy overnight,” he says.
“There is an enormous amount of work to be done, and commentary in this area sometimes gets ahead of this reality. This is why banks need to get started today, with a focus on more than simply complying with the requirements of regulation.”
Open Banking is the opening of internal bank data and processes to external parties via digital channels. It is designed to make it easier for consumers to access their financial records and transfer information between financial institutions.
Mr Heath says banks should not take a “wait and see approach” to Open Banking, warning that lessons learned from the introduction of similar schemes in other jurisdictions have shown that waiting until the 11th hour increases the cost, risk and disruption of the change.
He says it also enables competitors who started preparing for and understanding their new environment sooner to take advantage of those who started later on the learning curve.
“Looking forward, this is all part of Australian banks realising the need to have simpler operating models, and becoming more deeply connected to the customer and community,” Mr Heath says.
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