Since its official launch in July 2020, Open Banking appears to have made minimal headway in Australian public consciousness, despite the furious efforts of banks to deploy new open data-ready apps and features and ensure compliance with CDR rules. Now, nearly three years in, with the long-awaited introduction of ‘write access‘, are we finally on the cusp of a widespread consumer opt-in to the CDR?

Featuring speakers from three leading Australian challenger institutions – digital-only players Avenue Bank and Nano Home Loans, and newly merged (and now, arguably, Australia’s biggest) mutual bank Newcastle Greater – our panel, part of FST’s Banking Summit 2023, discuss how Open Banking, still in want of a ‘killer app’ or function, may soon gain new relevance for consumers, why CX innovation mustn’t come at the expense of product innovation, and where banks’ dev teams stand in the build vs buy software debate.

Featured panellists:

• Dale Hurley, Founder, Chief Digital Officer, Avenue Bank
• Greg Johnson, Group Executive, B2BNano Digital Home Loans
• James Cudmore, Chief Customer & Product Officer, Newcastle Greater Mutual

*Moderated by Luke Hannan.

Hannon (MOD): Let’s set the scene – the journey of open data in Australia. Where is it at and how do we measure its success?

Johnson (Nano): A bit of context: I work at Nano, and we use data effectively to improve underwriting and mortgages. It’s all about data; we’ve been a modest consumer of CDR (Consumer Data Right) data to date because there were issues with the CDR framework – things like joint account holders and other issues that meant that the usability of the data wasn’t great. A lot of that has changed. It’s nice to see a change of government pick up the mantle and push that agenda ahead. So I think Open Banking has now become a real thing.

The big challenge is the ‘So what?’ for the consumer. ‘Ok, I can aggregate my data through something and see all my accounts in one’. Well, you could do that with screen scraping. Not much has changed in that regard; perhaps it’s just a little more elegant.

The real power of the CDR comes with those use cases coming out of action initiation.

The UK has pressed ahead and taken a slightly different approach to us. They’ve pushed ahead with action initiation. If you’re not really familiar with it, it’s simply that instead of just aggregating data, you can push ahead and, on behalf of the customer, you can initiate action with another institution. I think that’s going to change the landscape.

The other thing – ironically, speaking in the context of financial services – it’s going to be the CDR’s push into the energy and telco sectors that’ll make all the difference.

Energy, in particular, is super opaque to people, and if you want to compare and work out your kilowatt usages on several different plans, it’s currently really hard. As customers get to see their ability to manage something that’s maybe a bit simpler, like my energy provider, that’s going to make everyone wake up and go, ‘Oh, we can actually think about this in terms of banking!’. There’s a huge competitive force in action initiation, because it’ll mean that smaller providers can interact better with larger providers without getting stonewalled like they tend to be.

Hurley (Avenue): Open Banking originally had some really big promises. We were promised that we’d become ‘dumb pipes’, where super apps would completely replace us and we’d have no customer interaction.

Back to what Greg was saying, however, there’s a lot of opportunity there in Open Banking that just hasn’t been realised yet, especially around action initiation.

Cudmore (Newcastle): In a similar vein, we’re clearly at the dawn of an explosion [in Open Banking]. Looking at the last few decades of advancement and then at what’s to come, you can see convergence at a macro level – it won’t be separate platforms, it won’t be separate customer interactions. You can see a future there, but the question is, what’s the bridge between where we are now and that future?

And to Greg’s point around particular use cases, saying to a customer, ‘Would you like your bank to show all your data?’ Pretty much everyone would say, ‘No thanks!’ But finding the right slice and the right entry point into it is the key that will unlock much broader adoption moving forward.

Johnson (Nano): You’ve got this really interesting thing in banking. When I started a long time ago, there was this new idea of the ‘customer’ and building stuff for the customer. Banks got on board and spent sh**loads of money to build a fairly basic capability.

You could argue that, in the banking space, we’ve got this funny thing where those who build the best experiences have very small balance sheets and access to capital, and those with massive access to capital and balance sheets often build slightly clunky customer experiences. I wonder whether Open Banking is going to lay that bare, because it could – though I think we’re a long way from it – mean that you actually see the customer experience and the balance sheet separated. And if that happens, I think we’re going to witness a new landscape.

Hannon (MOD): At the end of the day, the type of service and experience will have to rise because of the ability for a customer to shift, given that information sharing is so much easier.

James [Cudmore], you touched upon framing for customers. How can the industry better frame the value of the CDR? And how do we make that front of mind for them?

Cudmore (Newcastle): I work at a mutual [bank] that’s undergone a recent amalgamation with a fellow Newcastle mutual. To Greg’s point, one of the benefits of working in a small organisation is that you can have an idea on Sunday and start implementing by Thursday the same week. Having said that, the availability amongst speculative investments – you can see major banks throwing a lot of money very wide at lots of different solutions. That’s great, it provides for a lot of experimentation and opens the door to new entrants in the market trying new things. However, a lot of organisations need to be a little more focused than that.

It’s about getting really obsessive about the detail and the use case, and really doubling down in one particular area, as opposed to trying to do too many things.

Taking a general approach or a half-cooked approach – from an experience point of view – is the difference between adoption and none.

Being really surgical about what that use case looks like, and growing it out from there is going to be key for the industry.

Hannon (MOD): And protecting your APIs and not leaving them open when you build them!

[LAUGHS]

Hurley (Avenue): We’ve spoken a bit today about solutions in search of problem, for instance with ChatGPT. A lot of the time, it’s easy to get caught up in these great innovation opportunities without actually knowing what we’re trying to solve for the customer. We really need to challenge ourselves to go, ‘We’ve got this great solution! But is the problem that we’re solving for the customer an actual perceived problem for the customer?’, before we go out and spend all this money and time with our scarce resources trying to implement it.

Johnson (Nano): I like your thought of the laser-like precision.

You’re right, but I’d even be harder than you and say most customers care a lot less than you think they do. They’re pretty passive.

It’s really interesting to see, if you work in lending or in other areas of fin services, you look at the way someone behaves when they’re trying to get some money to buy a house or a car, etc. versus with savings and deposits or superannuation. We all get excited about what the customer could do. The reality is, customers are not looking to optimise their wealth and finances – a percentage are, sure – but the majority are just trying to get through, and it’s item 14 on the things they want to think about today; having a beer or a glass of wine comes before it.

Hurley (Avenue): One of our previous speakers, Stevie [Ann Dovico from NAB], put it in really well.

There are two things that customers want: they want us to keep their money secure, and they want it to be available.

Unless we’re meeting those two objectives, anything else that we’re doing, it’s either got to really give the customer extra value or we’re just wasting time.

Hannon (MOD): We often start with a really great idea, and it’s pure in its database, perhaps. But by the time it goes live, that idea’s turned into this Frankenstein’s monster of a project.

How do we keep things simple? How do we keep what we’re trying to do easy, so that a small thing stays a small thing?

Johnson (Nano): I’m usually controversial when I’m on panels, so I’ll stick to form. You’ve got to be prepared to tell people in your organisation they’re wrong – though perhaps that’s taking too confrontational an approach. We talk about challenging the status quo. But the problem is [if you take a softly-softly approach] – ‘Ok, I’ll accept risks that I can’t do that, and IT security’s nervous about that’ and so forth – people back away and deprecate the solution.

Once ‘the machine’ gets hold of the solution, and everyone’s allowed to have a voice – which is nice and everything – it gets so watered down that you just don’t end up delivering and you might as well not do it in the first place.

One of the advantages we had in building our technology was that we were building it for ourselves; we were our own risk department. We could say, ‘There’s got to be a better way’ and we actually managed to solve problems, because we said, ‘That looks like it’s unsolvable. That looks risky. But, no – we can!’.

In the open data space, it’s thinking about allowing the customer to set their level of happiness to interact. So, some customers will turn up and go, ‘I’ll give you all my data, I don’t care! You can have my passwords.’ (No, we don’t want those!). And then there are other customers saying, ‘No, I won’t give you any information’.

You’ve got to not build for the lowest common denominator; you’ve got to build in a way that’s flexible, which means that the people who will be grateful for that solution get that solution. You’ve got to push through.

I just think in corporate Australia the culture in a lot of our organisations is still so risk-averse. No one wants to put their head above the parapet because you’re rewarded for not making difficult decisions; you’re often rewarded for the status quo.

Hurley (Avenue): One of the hardest things that we’ve got to do is really work out who is our customer. We’ve got early adopters right through to your late laggards. Your early adopters, they’re going to be really tech-savvy, they’re going to take risks, and they’re going to do a lot of things for you. But you’ve also got your laggards and those people who keep their passbooks in alfoil because they’re ‘worried that people are going to scan it!’.

We’ve got to work out who is the customer that we’re going to serve. I mightn’t be able to keep 80 per cent of customers happy, but the 20 per cent of the customers that I’m focusing on, they’re all going to be happy. We’ve got to take those risks, and be focused on who we’re actually serving as customers when we build out our digital platforms.

Cudmore (Newcastle): That takes real design discipline. Being really transparent and disciplined, with this back-to-back surgical approach, about who this is for and who it’s not for. And that is our best foot forward from the moment. You can always build from that, but it does take a lot of discipline to do.

Hurley (Avenue): Better to fast fail than to spend 18 months trying to build a perfect solution for everyone to find out that no one wants to do it and waste all that time and money.

Hannon (MOD): We spoke a little bit about in-house development, and I wanted to cover the ‘build the future versus buy’ debate – strategic partnerships, brains versus brawn etc. There’s no sweet spot. How do you land on that build versus buy? Is it case by case? What’s best for the customer or best for us?

Cudmore (Newcastle): I don’t buy into that concept. Build versus buy is often seen as a binary – this idea of ‘Let’s stop building. Let’s just outsource!’. Every customer solution now, there’s a whole ecosystem working within banks to do something great for the customer.

The binary is too simplistic a way to view it.

Certainly, there are industry experts that need to be leveraged and professional services and so forth, but that needs to be coupled with ‘What’s the best way to get the solution to market?’ rather than a deeply philosophical, almost intransigent, approach around either of those things.

I actually think that the right tension for an organisation is finding where does one begin at one end, but also, ultimately, where they come together?

Johnson (Nano): Financial services is a funny industry. It tends to be very inwardly focused. I’ve worked in lots of different industries.

If you look at manufacturing, whether it be the manufacturing of hardware, technology, cars, etc., no one builds everything that goes into their car. And you’re right, the binary view of build vs buy is actually the wrong paradigm. The paradigm should be, ‘What are you going to buy in and what are you going to build?’ You’ve got to make decisions about where there is a competitive advantage for us, and why. But why would we build this at a factor of five times the cost if we can get something better now? People forget the build part comes with delivery risk, that you might never get there as well. Whereas, if you can actually see and digest this is the capability that we can buy today.

Hurley (Avenue): We can’t discount the delivery risk in buy as well. It’s not like we wash our hands of all risk by buying from a vendor. And, unfortunately, vendor salespeople can over-promise!

Johnson (Nano): It’s a very real risk that you need to weigh up. And you need to make your calls about how we get the capability we need, and also be really clear about what you’re trying to deliver.

The idea of Agile is great. But I’ve seen Agile to the degree where people go, ‘We’re going to spend a whole lot of money and not even know what we’re trying to get to or how we’re going to commercialise this’. It comes down to making really good decisions that are informed by the outcome and what’s the best way to get there.

Hannon (MOD): One thing you also spoke about was, no solution is everything to everyone. How do we a) get competent in slicing our solutions by demographics and customers, and b) understand the starting point to even think about that? Because what might be right for someone who walks into a branch with their card wrapped in alfoil isn’t the same for someone who’s sharing their passwords. How do you strike the sweet spot?

Hurley (Avenue): You’ve really got to question the value of segmentation, especially around demographics. When I was at university, we talked about gender, age, location, and maybe some basic behavioural demographics. But, really, in the digital age, we’re now able to work with social media companies and get to 1,000th of a demographic in very different ways.

Where we’re really seeing people is by understanding how we deliver value by giving them the choice to choose to be their own demographic. They might be the digital person, who Stevie [Ann Dovico from NAB], was touching on, who literally wants to do everything on their mobile phone, never really chats to anyone, just wants to get on and get it done themselves. This is versus the person who actually goes, ‘I want to talk to a BDM. I want to be able to ask questions back and forth. And feel like I’ve been hand-held through the process.’ It’s more about us giving the flexibility to the customer to segment themselves, rather than trying to put, for instance, Gen Zs in the ‘only want to be digital’ category. There are, after all, plenty of Gen Zs who are getting mortgages now for the first time who are scared and actually want someone to talk and interact with and ask questions like ‘What is lenders mortgage insurance and why do I do it?’

Cudmore (Newcastle): I’m in the mutual sector. There are 65 mutuals in Australia. Most of them are either bonded to a particular geography. They’re called, say Newcastle Permanent – it says that on the tin – or they’re bonded to a sector, so Police Bank.

One of the opportunities that the mutual sector is progressing in is how we broaden our reach to new customers and new segments or sub-segments or 1,000ths that aren’t strictly limited to what it says on the tin! Again, it’s about that surgical approach around not trying to ‘spray and pray’.

‘Spray and pray’ does not work. It works, perhaps, if you’ve got a lot of money to waste, but it won’t work as a general rule.

So, how do you really obsess over the details, obsess over the research and place your bets and go for it? That’s a really important factor for us.

Johnson (Nano): We sometimes also forget that the customer is not after a ‘customer experience’. They’re after a product.

There’s no point in having bespoke customised journeys to me if we all end up with the same product. It just feels a bit disingenuous.

There’s got to be a closer marriage between ‘This is the proposition that I’ve got for my customers and therefore I shape a segment and the specialised journey’. Because a lot of people go through a wonderful customer experience that feels really engaged, and then they get to the bit that they really are there for, which is to buy a product, and they go, ‘Oh, I expected more’.

We used to be very product-centric in the way we ran businesses. Now, we’ve gone a bit broader and designed with customer experience in mind. There’s an opportunity to bring those things a bit closer together again, because that’s what the customer really cares about is, really, ‘Can I get this product that I’m trying to buy?’

Cudmore (Newcastle): And to your point that financial services is often internal. Huge leaps internally, revolutions internally can be a tiny improvement on a moment for a customer externally.

A whole new way of calculating or viewing accounts or anything like that might take a whole revolution in terms of the bank’s ecosystem and a customer looking to go ‘Oh alright. That’s pretty neat. Thanks.’ And then that’s attention gone.

This is an edited extract from the Digital Leaders Panel Discussion featured at FST’s Banking Summit 2023.