In Australia, data is the new salt
Guest author Alan Tsen lends his thoughts on the killer use cases for Open Banking in Australia.
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1st of July marks the start of the new financial year in Australia. Usually, there’d be nothing major to celebrate on this day - well, unless you're an exceptionally geeky accountant. However, this year was slightly different. If you’re a true fintech nerd, you were probably popping champagne. It was a complete milestone for the sector in Australia.
This year, that date marked the first anniversary of Australia’s open banking journey. Much like any one-year-old, the Australian Consumer Data Right (CDR) regime was still crawling and just starting to take its first steps towards being a fully-fledged Open Banking regime.
For those who’ve been paying attention to what’s been happening Down Under, the regime is, in fact, much broader than just banking data. Over time it’ll grow to encompass energy markets, telecommunications and possibly superannuation. In Phase 1 of the CDR, the regulatory plumbing for data sharing to work across several industries has been built - no mean feat.
the regime is, in fact, much broader than just banking data.
Yes, there is still a long way to go. For example, intermediatory access was just recently introduced, the list of exemptions granted by the ACCC to the banks is still much longer than many hoped it would be and there are still only 17 CDR data recipients on the register. Write access is not yet on the roadmap. However, the foundation has been laid for a regime that will be highly influential in other markets as the template for not only Open Banking - but building an open and accessible data economy.
Commoditising data
So what now? What are the killer use cases for Open Banking? Well, let’s start with this:
“Information about money has become almost as important as money itself.”
—Walter Wriston, CEO/Chair, Citibank,
This famous quote from Wriston (which is inscribed in the lobby of New York's Library of Science, Industry and Business) perfectly describes the transition we’ve gone through with data in financial services. For the most part, banking has been transformed into bits and bytes. However, these critical pieces of binary are locked away in vast data lakes owned by banks - not in the hands of consumers. Regimes like the CDR help release this data and turn it from the oil of the new economy to salt.
Regimes like the CDR help release this data and turn it from the oil of the new economy to salt.
Before the 20th Century, salt was a rare commodity. Its rarity resulted in it being used as a currency and its value has even incited protests. However, this all changed when it was synthesised and its production industrialised. Salt became cheap and abundant. The same thing is happening to financial data - it’s becoming more available and is moving from a rare commodity that a few control to being accessible to all innovators. The Australian CDR regime takes it even further with a world where major data isn’t siloed away by incumbents. It’s freely available with the consent of the owner of that data - the consumer - instead.
The full economy approach being adopted in Australia will have a profound impact on the way data is treated. This process of ‘industrialising data’ is starting with banking but as the scope of CDR broadens it will result in the commoditisation of many other data sources. These have been a key advantage for the incumbents in these industries. Beyond opening up competition in markets, the CDR unshackles data formerly held by incumbents, and creates new segments within each industry - forget personal financial management apps. Unleashing this data will allow for the creation of life management apps.
In the fintech industry, we usually think unleashing the data hoarded away by banks combined with payment initiation is the ‘killer combo’. However, opening the aperture of open banking to include data from other industries will break down the walls between finance and other sectors. It’s this economy-wide approach to commoditising data that is going to unleash the most impactful use case for fintech and this experiment is getting its first run Down Under.
My unfiltered opinion
So what’s the killer use case for CDR? It’s the industrialisation of data and freeing it from the silos it has historically resided in. Banking data is moving from being rare to abundant. The optimisation of its movement is now what the CDR (and like regimes) will need to focus on. An increase in velocity is vital. However, that will come as will the innovators ready to build products that change how you interact with your financial world.
