If everything goes according to plan, then Australia will introduce open banking in July. The founder of neobank 86 400 cannot wait, but believes the benefits will take some time to manifest.
Robert Bell founded the challenger bank in 2017 to transform a banking industry that he considered to be failing to serve customers as well as they could. The FinTech venture is one out of several banks such as Judo and Up that have launched in Australia over the past few years.
He is a big supporter of the Consumer Data Right (CDR), which was set up to facilitate open banking.
Consumers should be able to expect the Big Four Australian banks will share their credit and debit card data from July 1, provided they have given them permission to do so.
Yet, Bell believes it will be two years before consumers notice any real benefits of the change.
‘There’s a lot of hype about the immediate benefits from Open Banking and the reality is the benefits from Open Banking will take longer than people expect,” Bell told Which-50 in a new interview.
Bell argued the consumers will not feel the benefits because of the repeated delays in the rollout of open banking and because banks are already dealing with other digitalisation projects.
“Assuming that the four big banks meet the July deadline – which is a pretty big assumption – that’s only a very limited subset of data from four financial institutions,” Bell told Which50. “So that’s a long, long way off having a comprehensive set of data that would be really useful.”
That is a big if. Which50 noted that the Commonwealth of Australia has suggested that the coronavirus pandemic could delay the start date.
The challenger bank is one of several FinTech organisations that are testing the data portability scheme along with Australia’s big four banks.
“We have put disproportionate resources into that [testing phase] relative to the size of our company because we think it’s the right thing to do for Australians,” Bell said. “It’s the right thing to do going forward.”
The scheduled introduction of open banking comes after Australia’s financial industry has been divided about screen scraping, a practice where customers give a third-party company, such as a FinTech firm, permission to access their data and using it to deliver a service or product to the customer.
86 400 is one of the companies using it. CBA, on the other hand, has argued that it would keep the safety of customers’ data at risk.
A few weeks ago, the Australian Securities and Investments Commission (ASIC) told the nation’s senate that it had no plans to interfere with screen scraping practices because CDR would make the practice redundant anyway.
In Europe, open banking was introduced in 2018 as part of the EU’s Revised Payment Services Directive (PSD2).
While it has been two years since then, not everyone is convinced about the impact open banking has had on the banking industry.
For instance Tom Blomfield, founder and CEO of UK challenger bank Monzo, recently said that the “positive effect of open banking on innovation has been nil.”
He added, “I don’t see any businesses based on open banking in Europe whatsoever.”
Instead he argued that it was just slow and costly for new FInTech startups to implement the new standards.
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