A little more than a month away from the Open Banking pilot and eyes remain locked on the big four as they lead the implementation of Australia’s first Government-mandated data-sharing regime. But could a challenger bank prove the catalyst for innovation in an Open Banking era?
While the supporting cast of Australia’s banking sector awaits the official 2020 rollout of the Consumer Data Right (CDR), one challenger bank is not content to sit on the sidelines.
ING has been among the fiercest advocates for Open Banking, leading the charge to adopt the strictures and digital infrastructure that can support the customer data sharing regime.
“Certain organisations will have access to Open Banking well ahead of some of the challenger and start-up brands. However, we’re not going to wait for that – and we haven’t waited for that,” said Melanie Evans, Head of Retail Banking at ING Australia.
Headlining FST’s 2019 Banking Summit, Evans urged the fellow banks to move as one on Open Banking, ensuring the benefits of the CDR are realised by the entire industry, not just the big four.
“We’re not going to wait for Open Banking to be available within the financial services system,” she said. “Our approach is to start thinking about banking as part of a broader ecosystem well ahead of the [CRD’s launch].”
While acknowledging Open Banking as a technological milestone, Evans more importantly sees it as “fundamentally and philosophically” a transformation of the industry’s approach to customer data sharing, moving from a traditionally closed, protectionist regime to one that offers a mutually beneficial network of free information exchange.
Evans implored banks to “shift their thinking” on Open Banking, ensuring all Australian institutions can “actively participate” and reap mutual benefits of a fully open system.
Historical notions of financial institutions being the sole custodians of their customers’ data – an idea been “hardwired into us as bankers,” she noted – will be cast aside in the Open Banking era, with customers set to gain “complete control about where that data goes, who we share it with as a financial services organisation, and what it can be used for”.
“We can treat this as a technology and regulatory piece of work – but philosophically and fundamentally, Open Banking shifts our power, insight, and control right towards the customer.”
As a challenger institution in Australia, though with multinational clout, ING welcomes the transition to Open Banking as the “right thing to do” by customers.
Crucially, Evans believes that as banking services take on an increasingly subordinated role in the lives of consumers, the CDR will serve as both a catalyst for innovation as well as means for banks to reestablish their relevance among consumers.
“We think it’s amazing from an industry perspective as well, because the more open we are, and the more connected we are to other ecosystems and other industries, the more innovative we will be,” she said.
“The utility value that we can deliver a customer in an Open Banking network is far greater than we can deliver as a mono-line brand with a mono-line product relationship with a mono-line customer.”
Opening customers to open banking
Insiders acknowledge that the CDR remains largely unknown amongst the wider public. Translating the benefits of a nebulous data-sharing regime remains an ongoing challenge for financial services – but an effort worth investing in.
“Even as we’ve started on this program of work called ‘Open Banking’, we haven’t really thought about it from a customer’s perspective, because most of the benefit that we will actually give to customers is not banking – it’s actually living,” Evans said.
As banks become increasingly disintermediated from everyday consumer transactions (with services like PayPal effectively facilitating customers’ online payments without their ever having to interact with a bank), there is increasing pressure on traditional banking institutions to prove their relevance in the lives of their customers.
“In an Open Banking world, where basically any number of applications might own that aggregation or own that customer experience, it is possible that a consumer might see a certain application as their bank and that application or that brand may not even have a balance sheet.”
“The challenge for us as an industry is that, if you think about where the customers currently act and what applications and platforms our customers are accessing on a daily basis, they’re accessing the Facebooks, the YouTubes, the messaging applications and so on.
“If you take this concept of openness – open platforms, open banking or open data – to the very nth degree, it could be that banks are simply ‘the balance sheet’ but the customers are actually viewing the interface and the platform they use on a daily basis as their real financial services provider.”
In this open era, ING is challenging perceptions of what it means to be a bank. Yolt is ING’s first dedicated foray into the fintech space, offering, as Evans notes, “an entirely different value proposition from any other banking app”.
Developed initially for the UK market – among the first countries to adopt CDR, and widely considered its most progressive and mature markets (curiously, it is a market where ING operates without a banking licence) – Yolt was deliberately built to exclude the traditional bank app balance sheet.
Yolt, at its core, is a money manager and transaction tracker that gives customers a holistic profile of their financial profile. Crucially, the app leverages UK’s advanced Open Banking environment fully, aggregating banking data across multiple institutions to give customers a comprehensive financial ecosystem.
Yet the fintech’s value proposition goes beyond its financial services offering. The true ‘value-add’ of its app is in its ability to “compare, contrast, and offer management in utilities” based on customers’ financial profile.
Experiential, not transactional: Yolt, represents for ING a potential future for banks in a CDR-dominated world. As customers become increasingly disengaged from their banks, it offers crucial insight into what it might take for banks to maintain their relevance among an increasingly savvy customer base.
“Yolt [is not] a bank that offers the best interest rate, the cheapest home loan, nor the quickest home loan,” Evans said. “The proposition is absolutely about the experience, about data aggregation, and about the value that it can add in terms of spending, in terms of saving, and in terms of comparison.”
Yolt is a carrot for the industry – part of a wider push by ING to both draw consumers into the Open Banking fold as well as to impel industry heavyweights to adopt similar schemes that can take full advantage of a free-flowing data regime.
Yolt, and others like it, serve as a vehicle for financial services to not only deliver more targeted service offerings and to spur innovation in an Open Banking environment, but also to broaden banks’ appeal to consumers across a range of services.
“What we’ve seen in the UK and certainly in Europe is, some of the incumbent banks actually spin off joint ventures or new business models like Yolt and move up and move forward in the value chain,” she said.
Uptake of Yolt has been impressive, with more than half a million customers across three geographies (the UK, Italy and France).
Yet Yolt was borne as much out of a need to better service customers in the Open Banking age as it was to serve as a practical lesson for banks on the importance of embracing a platform-based ecosystem.
The backbone of this platform ecosystem has undoubtedly been the Open API. It is the vital intermediary that allows apps to tap into the deep wells of data held by fellow financial institutions and extract meaningful information for consumers.
Indeed, the successful implementation of the CDR network would be severely compromised without an established Open API framework.
“If you really want to revolutionise how a customer can interact – and we know that Australians forever and a day have been multi-banked – the consumer is better off when everyone moves to that Open API-type service approach where we will take payment instructions, we will take switching instructions, we will take information requests from the platform layer or the service layer.”
As Australia prepares itself for the imminent rollout of Open Banking, we find ourselves in a fortunate place. The successful deployment of the New Payments Platform (NPP) last year presents an ideal template for the CDR’s rollout.
“If we follow… the rules, the infrastructure, and the way in which we’ve participated as an industry, from an NPP stance, and we transfer that into the Open Banking ecosystem, then we’ve got a pretty good start as an industry.”
For Evan’s, while businesses can reap enormous benefits from a successful CDR regime, the goal is ultimately about empowering customers to make better choices in their financial lives.
“It’s really about putting the customers in the drivers’ seat. If we take Open Banking to be completely open, and not just an interchange between regulated licensed banks in Australia but the platforms and ecosystem that our customers are actually dealing with on a day-to-day basis, then the value that we can drive to customers is incredibly high.”