Open banking about ‘creating value for customers’: Neobanks

Speaking at the SWIFT International Banking Operations Seminar (Sibos) in Sydney on Wednesday (24 October), the representatives from several neobanks welcomed the mandatory open banking regime, which requires banks to share customer financial data starting from next year.

During a session entitled “The rise of challenge banks in Australia”, the CEO of volt bank, the CEO of 86 400 and the chief strategy and innovation officer at Xinja all backed the idea that open banking was more than credit reporting, arguing that banks will need to work harder to demonstrate what they are doing with the new data they have access to.

The CEO of volt bank, Steve Weston, said that banks would have to work harder and pass “two tests” to keep customers.

Mr Weston elaborated: “The first [test]: Is my data safe and are you going to protect it? The open banking regime should make that easier. But the second thing (and you don’t hear it being talked about all that much) is the value exchange.

“The consumers are getting more savvy. [They think], ‘My data is worth something, so if I give it to you, what do I get in return?’”

The volt bank CEO outlined that the neobank would answer that question by providing consumers with the ability to “transfer [their] direct debits automatically, show [them] all [their] bank accounts, and the interest rates [they are getting — either being charged or being paid — and show [them] if [volt bank] can get a better deal.

“We’ll compare your gas, electricity, your telco, your insurance policies. If we think we have found you a better deal, we will send it back to you, that’s the value exchange,” Mr Weston said.

Likewise, the CEO of digital bank 86 400, Robert Bell, likened big banks supporting open banking to turkeys supporting Christmas.

While Mr Bell said that banks would have to get on board, “it will be much slower than people would like”.

"We’re already seeing so much commentary around it [from the banks] about it being difficult, or hard, or costly, that is all just trying to slow it down. But it will happen and it will be beneficial for customers,” Mr Bell added.

Echoing Mr Weston, the 86 400 CEO said that the fundamental proposition of a bank in the future would be the value they provide customers.

He said: “The real thing about open banking and customer data is how to demonstrate to a customer that you can give them value. If you can convince them that you can add real value, then they will share the data and the bits about privacy and security will become the second part. People aren’t actually worried about it.

“In the first instance they want to know what the value of it is for them. So, the answer around open banking is demonstrating to customers how you can add value to them, how you can benefit from their data. Because it’s not the bank’s data; it’s their data.”

Van Le, the chief strategy and innovation officer at Xinja, added that identifying that value for customers should not be a challenge, given that many consumers already share their banking data with third-party platforms.

“If anyone wants to share their banking username and password, there are heaps of service providers out there who will be quite happy to take it. But look at the value that customers are already getting. That makes that exchange, and that risk, worth taking,” Ms Le said.

“So, to some extent, unregulated open banking and data sharing is already happening. There are already consumers that are seeing value in being able to share that data, and anyone who isn’t starting from there is really going to be left behind.”

However, Ms Le argued that open banking and financial data sharing was the tip of the iceberg, adding that, the more data a customer is willing to share with their financial institution, the more value the bank could provide.

She extrapolated: “The place to look for the value and data sharing isn’t just the sharing of banking data. It’s the sharing of any data that customers are making available to a variety of apps, service providers, technology players, life services, the data that you give to your doctor, the data that you give to your fitness coach.

“There is so much value that is being created out of this new, data-sharing economy, and that is the heart of it. Creating value out of the sharing of the data, not the holding, not the protecting of it.

“The value is isn’t in controlling access to data; the value is building on that data, scaffolding it, creating a much richer picture of people and what is happening in their lives right now and also what’s possible [for the future].”

[Related: Emerging lender signs on to open banking API]