“Australia is experiencing both a profound digital disruption in financial services as well as a fundamental shift in how data is utilised. We are seeing consumers rightfully demanding and receiving more control over their data.”
FST Media: The advent and progressive implementation of big data, AI, and machine learning technologies has brought with it increasing concerns around data privacy and security. How is Westpac addressing the concerns and strengthening consumer confidence in its systems?
Twiss: We recognise that our customers place enormous trust in us, as their bank, to keep their personal information safe and secure. Respectfully managing their data is fundamental to the way we do business and is something we take very seriously when adopting and investing in new technologies.
Our first priority is to ensure that everything we do in data is secure and respectful of privacy. Consumers will form their own views about data use and data sharing, and those views will evolve over time, and it’s our job to make sure we meet the customer where they are. That means being transparent about how we collect and use data and ensuring that we are using it in ways to help provide better customer outcomes.
We take an open-minded yet cautious approach to implementing new technologies and platforms. For industry-wide initiatives, such as Open Banking, we are also actively involved in the consultation process with government and regulators to ensure our customer’s interests are considered and protected.
FST Media: Looking into a crystal ball, what does the future of financial services in a budding Open Data world look like?
Twiss: Australia is experiencing both a profound digital disruption in financial services as well as a fundamental shift in how data is utilised. We are seeing consumers rightfully demanding and receiving more control over their data.
The advent of Open Banking is one major influence. Realising the benefits of Open Banking will depend on the level of confidence that customers have in the system, and the readiness of businesses to grasp the opportunities it presents. Public education and awareness will be critical for adoption, and confidence will build from enhanced privacy legislation, including the protections in the consumer data right (CDR) regulatory framework.
A mature Open Banking environment will further open the market to new entrants, give customers more choice in how they choose new financial products and drive even more intense competition. Consumers will actively seek new offers and will switch more frequently, so financial providers will be forced to rethink opportunities and reshape how they deliver value to customers.
Coupled with innovation in payment platforms (like pay-later platforms and others) there is no doubt Open Banking will disrupt traditional banking and payment models. As friction declines due to better data sharing and improved technology, customers will find it easier to use multiple financial-services providers and to switch providers, which means that the pressure on incumbents and challengers alike to innovate will get even higher.
FST Media: Last July, Westpac announced it had become the first of Australia’s big four to launch API availability for generic product data. What is the consequence of this launch and what are the next steps towards realising Open Banking’s full potential for Westpac?
Twiss: At the end of 2018, the Federal Government announced a phased approach and timeline for the introduction of Open Banking, starting with the release of generic product data from 1 July 2019.
Keeping customers’ data safe is crucial, and the pilot’s first tranche involved major banks voluntarily releasing generic product data through APIs (that is information in machine-readable form). The pilot program will lay initial foundations to test the performance, reliability, and security of the system before any personal consumer data is shared in February 2020. It allows fintechs, software developers, and other third parties to gain access to generic Westpac product information, including rates, fees, and charges in a programmatical way.
Our focus is on creating a trusted open banking regime that is secure, flexible, and easy to use for all Australians. We have been actively engaged in the design of the system and will continue to steadily work towards delivery for February 2020 with the government and regulators.
FST Media: While Open Banking is big news for the industry, it appears to have gained little traction amongst the very consumers who will benefit from its rollout. What ingredients are necessary to create a trusted Open Banking regime that is secure, flexible, and easy to use for all Australians?
Twiss: Recent RFI Australia research shows that customers trust banks more than other institutions to protect their data; however, most consumers feel uncertain or hesitant about sharing their personal information.
Public education and awareness in Open Banking’s opportunities and protections will build confidence and trust in the system, which is integral to its success. Communicating directly with our customers, educating our employees to assist our customers, and investing in public education campaigns will help consumers to understand that they are in control of how their data is used and shared.
FST Media: We’ve seen the rise of digital-native neobanks – such as Volt Bank, Judo Bank, 86 400 and Xinja – with big ambitions to disrupt the Australian financial services industry. How can incumbent banks like Westpac maintain their competitive edge and stay relevant?
Twiss: Digitally native neobanks are tapping into a millennial market which is tech-savvy and less brand loyal. Whether they can reach sustainable scale in the Australian market is yet to be seen. There is no doubt that neobanks will challenge incumbents through innovative tools and digital processes, increasing customer expectations along the way.
The real test for major financial institutions like Westpac, who have an incumbent advantage due to our large customer base, will be to offer an equally attractive, seamless digital customer experience. Collaboration with partners and investing in fintechs – and the right opportunities at the right time – will also be key to staying relevant.
FST Media: Strategic partnerships are increasingly important in the evolving financial services industry. How is Westpac leveraging partnerships with start-ups through its Reinventure fund?
Twiss: Our aim is to be at the forefront of technological advances for the benefit of our customers, to support entrepreneurs, and drive digital transformation for our economy. Westpac has a long-standing reputation as a supporter of early-stage fintech companies, through both direct investments and through our investment in Reinventure.
Traditional models of banking are changing, so forming strategic partnerships helps us to remain agile and adaptive to rapidly changing digital advancements. For example, our launch of Presto Smart, a system that integrates business customers’ point of sale systems with the bank’s merchant terminals, was built in partnership with Assembly Payments – one of Reinventure’s first investments. Other investments include Zip Money, and Canada’s Flybits, which helps us to better leverage proprietary data through AI for hyper-personalised customer messages.
We also back Australia’s entrepreneurial spirit through internal initiatives such as our new Emerging Industries team, which lend to early-stage businesses, and our Businesses of Tomorrow mentoring program. Our investments in this area are a constant learning process and set us up for the future by allowing us to capitalise on the right opportunities in the market.
FST Media: Which disruptive technologies do you predict will have the greatest transformative impact on the financial services industry over the coming years?
Twiss: Fintech disruptors are fast-moving companies transforming everything from mobile payments to insurance. They are targeting some of the most profitable parts of the financial services value chain, particularly in payments (ZipMoney, AfterPay, and Facebook’s Libra).
AI and machine learning will force business models to move from physical to digital banking, and the simplification of legacy systems to the cloud will lower operating costs along the way. The sharing economy will also become embedded in aspects of the financial system, creating faster and more efficient channels between providers and capital users.
The challenge for all of us will be to ensure that the regulatory and ethical frameworks adapt quickly enough to keep pace with the development of technology.
FST Media: What lessons and insights are you hoping to impart on your audience during your upcoming presentation at Future of Financial Services, Sydney conference?
Twiss: I’ll be taking the long view of how financial services is likely to evolve in the years ahead, drawing analogies to other industries and how they’ve been disrupted by technology and changes in customer expectations. I’ll also outline some scenarios for what the end state could look like, and what it will likely take to be a winner in the next decade.
FST Media: Finally, are there particular brands or business leaders outside the financial services industry you look to for inspiration?
Twiss: My belief is that Westpac is a service rather than a product business, so I take my inspiration from leaders and businesses that work backwards from what customers need and want and built their offerings around that. In the for-profit sector, I think the tourism and hospitality sector has always had a very short and clear logical path from customer needs to their offering, and so I think some of the best airlines and resorts provide inspiration to us all. The not-for-profit sector has always inspired me with their unwavering dedication to client outcomes – they have literally no other reason for existing, and some social-services organisations do an amazing job of entirely building themselves around customer outcomes.
Woolworths has defended competition with a customer focus that continues to evolve in terms of store formats, product range, incentives, and an extensive loyalty program. PayPal uses customer-centric thinking in everything they do, and despite being a mature company now, they are still very much thinking like a start-up and remain focused on disruption for the benefit of the consumer. Finally, I think a number of government organisations have done a great job of really embracing this service mentality and going above and beyond for their citizens – I’d single out the transformation of Service NSW as an inspiring example here.
Don’t miss Jamie Twiss at the Future of Financial Services, Sydney on 14 November, 2019 revealing how FSIs can effectively leverage data assets to achieve success in the Open Banking era. Register now to confirm your place!