Open Banking:

Insights from our Open Banking expert, Anne O’Learyfinancialintelligence.informa.com 2019

Three shortcuts to success for Australian banks, from the UK

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Currently, mobile banking in Australia among the incumbents is ahead of many other regions. Each of the four major banks, ANZ (Australia and New Zealand Banking Group), CBA (Commonwealth Bank), NAB (National Australia Bank) and WBC (Westpac), provide user-friendly experiences.

Challengers are already making traction in Australia, in May 2018 the APA granted the first restricted banking license to neobank Volt, fintech Xinja will likely follow. This competition from challengers will only intensify with the introduction of Open Banking in Australia next year.

Australia’s Open Banking regulations similarly reflect PSD2 and GDPR, European legislation that came into effect last year. This change in the landscape can be viewed by Australian providers as either a threat or an opportunity. Which of the two it becomes for each provider will depend on whether they action the following three best Open Banking practices learnt from the UK:

1. Invest in technology platforms 2. Promote Open Banking to the consumer 3. Work with fintechs, not against them

2 | Informa Financial Intelligence: Open Banking insights

Open Banking: Three shortcuts to success for Australian banks

Open Banking comes to AustraliaConsumers have historically been very loyal to their banks, though this loyalty is not a result of satisfaction, but rather the lack of differentiation between propositions. This will change as challengers provide better user experiences. Australian banks should focus on technology and integrating APIs (Application Programming Interfaces) as early as possible.

In the UK, HSBC and First Direct launched separate aggregator platforms, Connected Money and Artha respectively, with Barclays introducing aggregation as a feature of its main mobile platform. These offer limited functionality which costs users, part of the issue was the slow integration of APIs.

Third party aggregation platforms in the UK, such as Yolt and Emma, are still underdeveloped yet provide a very real threat to incumbents. If customers can manage their entire financial lives in one place, there will be no need for them to interact with their primary account’s app.

This will reduce customer’s engagement with their bank, making it far more likely for them to switch providers. Incumbents need to ensure that their experience matches or outstrips that of fintech challengers.

1: Invest in technology platforms

CBA (AU): An example of Australian incumbents integrating new technologies with CBA’s chatbot

Artha (UK) by First Direct: Account aggregator platform from an incumbent bank

Despite ad campaigns from HSBC and Barclays, consumer knowledge of Open Banking and its benefits is very low in the UK. YouGov stated in August 2018 that only 28%2 of the British population are aware of Open Banking (indeed, in Australia 83% of people are unaware3.

If consumers see a provider as a stand-out expert and leader of Open Banking, they will be more likely to use their services and trust that they are getting the most out of Open Banking through their incumbent provider.

As customers become more aware of the benefits, they will likely shop around to find providers that offer better experiences. This is evidenced by the rapid expansion of challenger banks in the UK, Monzo already has over a million users and Revolut recently surpassed three million. Therefore, it is important to promote the changes of Open Banking, alongside technology and platform investment, to retain customers that compare their incumbent offerings vs. challengers.

4 | Informa Financial Intelligence: Open Banking insights

Open Banking: Three shortcuts to success for Australian banks

2: Promote Open Banking to the consumer

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Australian banks should embrace the potential to differentiate themselves through the adoption of aggregation, PFM, and optimised user-experiences by developing their own platforms or creating partnerships with fintechs. Australian incumbents appear to already be aware of the importance of external partnerships. WBC for example has already invested $100 million in third party providers4.

The main benefit of working alongside fintechs and challengers, or even acquiring them, is the ability to integrate their technology and infrastructure into an existing incumbent platform without having to build completely in-house. At the same time, it reduces the threat of competition, whether acquiring fintechs before their offering is scaled up or preventing strategic alliances between fintechs and another incumbent bank.

3: Work with fintechs, not against them

HSBC (UK): YouTube advert from HSBC promoting Connected Money: www.youtube.com/watch?v=H1NvJ6qdO0I

Xinja (AU): Challenger in Australia expected to receive a restricted banking license from the ASA

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