Fintechs use financial data to operate, currently through aggregated data sets. Without aggregated data sets and without access to consumer financial data and product data, fintechs would struggle to provide solutions for financial services.
They are currently being used through screen scraping, a form a data retrieval by gaining customer permission to use their username and password. The fintech industry in Australia is heavily reliant upon aggregated data sets and screen scraping, which was not included in the scope of Open Banking in the review published by the Australian government. They are arguing that not including these scraping techniques in the scope of Open Banking, could kill the fintech industry, with scraping providing low cost alternatives for smaller banks and fintechs. It gives them a competitive advantage against the larger, older banks.
In a 42-page submission, Fintech Australia is arguing that without access to financial data, the fintech industry in Australia won’t be able to expand onto the global stage. They will miss out on the competitive advantage and improved customer experience that shared data provides. An open banking system is set to share consumer data and product data, making the banking sector more open about the services being provided. Fintechs could experience more growth with more shared data in Australia.
Like the Australian Banking Association submission, which we spoke about in a previous blog, Fintech Australia is asking for working groups that address security and liability issues. By bringing Open Banking to Australia, fintechs will be more innovative, with greater competition and customer experiences not only in the banks, but in the services and products provided by various fintechs in Australia. Delivery will be more efficient, more cost-effective and consumers will have more choice.
However, there are some things limiting fintech’s ability to access consumer data. Some people are reluctant to provide their usernames and passwords, and some believe the banks are advising against passcodes being given to the fintechs who use these scraping techniques. In Fintech Australia’s submission, they reported that between 10 and 50 percent of potential customers are unwilling to hand over passcodes. There are security concerns that could prove to be a hurdle for the industry, lending the question of how it could affect vulnerable consumers.
The businesses and fintechs with the most success have been those with the most access to data. An Open Banking system would make it more freely available, expanding and supporting Australia’s fintech industry.
To ensure the success of Open Banking for fintechs, Fintech Australia suggests having balanced legislations, and ensuring strict standards are met for security reasons. As per the review, consumers should be able to direct companies and institutions to share their data, and give them access to product data. Fintech Australia says that consumers should be able to do this by June 2019, setting a timeframe for Open Banking in Australia. This is set to ensure fintechs and other businesses can compete with other international players. With an industry that is constantly changing and expanding, fintechs in Australia need to be able to keep up.
An Open Banking system could change the banking sector and the potential for fintech growth in Australia. It could have a large impact on face-to-face advice, on product aggregators and on product manufacturers. Consumers will be able to access their own data and share it with financial advisers and wealth managers. It could provide new opportunities for face-to-face advice, with more access to data. Data sharing in Australia could make new, innovative and better financial advice services to ordinary Australians, through fintechs and various other financial services.
You can read Fintech Australia’s full submission, here.