About Me Hi, my name is Alan Tsen • I’m a recovering lawyer (don’t hold it against me). • Currently, I’m the Chair of Fintech Australia. We’re Australia’s leading Fintech industry Association. • Former GM Stone & Chalk, Melbourne. • Founder of Fintech Victoria. • Also, was a part of the Federal Government’s Fintech Advisory Group and a member of ASIC’s Digital Finance Advisory Committee and lead Fintech Australia’s working group on Open Banking. • Angel investor in early stage Fintech startups. Come talk to me if you’re an early stage startup.
The TL;DR • The Consumer Data Right (CDR) is going to be a huge transformation for the Australian economy… but it’ll take time. • Fintech startups will lead the disruption. • Open Banking is but one part of the puzzle and the real break outs will occur when other industries come on board in subsequent phases. • New exciting products will emerge that will make consumers’ lives better. • There are still near term challenges as the regime is implemented. • Open banking will be a ‘narrative disruption’ in financial services. It’ll reduce data moats and change the way consumers interact with the industry.
The Background • It’s been a long road to get to where we are today with the CDR. The journey started with the Murray (2014) and the Harper Reviews (2015). • Both recognised the role opening up data could play in improving financial outcomes. • However, the really foundational work was done by the Productivity Commission in its Data Availability and Use Inquiry (2017). • This proposed a bold economy wide CDR to give individuals and SMEs greater access to their data. • This culminated in the Farrell Report (2018) which provided the how a CDR could be established. The Federal Government has agreed to the recommendations made in the report and implementation began.
The Background • The Farrell Report can be summarised in four principles that are informative in understanding the CDR (and thus Open Banking): • Customer-focused - it’s for them and about them. • Competition enhancing - to increase competition in banking products in services, so customer have more choices. • Opportunity creating - to provide a fertile ground for new ideas and businesses to emerge in the data economy. • Efficient and balanced - should take into account security and privacy. Should be fair and efficient in design. • It’s important to note it will start with banking and move to energy and telecommunications next.
The Background • But what do we mean by Open Banking? • Customer data will have to be shared by data providers at the request of the customer with data recipients. • The data recipients will need to be accredited and have clear customer consent to that receive data. • The data will be across product, customer and transaction data. • Mechanically, the framework is brought to bear through: • Legislation which instantiates the Open Banking regime (Treasury) • Rules which outlines the principles, requirements and outcomes for the application of Open Banking (ACCC); and • Standards which set out the technical method of implementation (Data61 - Data Standards Body).
Where Are We Now? • The first stage of the CDR was enacted into law in August 2019. A designation was passed in September which identified Banking as the first sector. • The ACCC released their 'locked down’ version of the proposed rules this month. • The standards are being worked on by Data61 and are in draft form. • July 2019 marked the beginning of the regime with the 4 major banks required to provide product reference data on accounts. • February 2020 will be when the 4 major banks will need to make data on transaction, credit and debit card, deposits and transactions accounts available. • July 2020 the major 4 banks will also make data available on mortgage accounts. Other ADIs will need to make product data on accounts available. • February 2021 the major 4 will need to make transaction data available on all covered products.
The Opportunity For Fintech Startups • The promise is that Open Banking will drive more consumer choice, lower costs to consumers and improve competition in financial services. • This Cambrian Explosion of new use cases will make banking more transparent and provide Fintech startups with an opportunity to compete against incumbents. • If you believe that data is the new oil, Open Banking should result in it becoming the new salt. • But how are startups thinking about Open Banking? What are the likely use cases to emerge in the space? • Is this going to be a narrative violation or a narrative continuation?
Current Challenges • The UK experience has taught us that it will take time. • We’re not there yet. Still work to be done for the regime to really work for Fintech startups. Some are near term - eg. assurance program, role of intermediaries. • While others are longer term questions - eg tiered accreditation. • Costs associated with accreditation is still a potential challenge. • But overall the Open Banking regime provides a glimpse into the future as Australia moves towards a true data economy.
A Narrative Violation? • The current narrative is that startups struggle to compete with incumbents due to resources, capability and scale. • The narrative is already being violated as we see startups take on incumbent banks - eg. Revolut has hit 6 million customer globally. • Open Banking will spur this trend as greater access to data will begin to level the playing field for startups and allow for more data driven products. • But there is a huge opportunity for incumbents to partner with startups - eg. Bud and ANZ.
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