Commercialising open banking next priority: bank

Customer-owned lender Police & Nurses Ltd CEO Andrew Hadley said that while the initial priority for financial institutions is to ensure availability of data under the open banking regime, P&N Group is giving consideration to what the implications of open banking are for customers.

Following on from this, the bank’s priority is to create a “compelling” value proposition for customers to use open banking effectively.

“I think that’s probably the battleground of the future,” Mr Hadley told Mortgage Business.

“The first step in essence is just making sure that the infrastructure is set up and the financial institutions in particular are able to make their data available.

“But I think the battleground of the future is how to actually commercialise that and turn that into a meaningful value proposition for your customers, and indeed, attract new customers as well.”

In November 2020, the open banking regime expanded to allow customers of the four major banks to share their home loan and mortgage offset data to accredited recipients under a new stage of the Consumer Data Right (CDR).

The regime has been in operation by the four major banks since 1 July 2020.

Mr Hadley emphasised that the ultimate goal of the regime is to “throw the power back to the consumer”, which means organisations that participate in open banking need to offer an attractive value proposition.

“Ultimately, the positive of open banking is it should give consumers far more control over their data, and I guess if consumers can make that data available to people, it should entail them being able to get more information, to understand better and easier what options are out there, and all in all, that should make life easier for them,” Mr Hadley said.

He also said that, while there is perception that switching financial institutions can be an onerous task, with customers overwhelmed by the complexity of all of their direct debit arrangements and avoiding switching banks unless necessary, open banking could ease the process of switching banks for them.

Furthermore, Mr Hadley added that the regime might incentivise lenders to launch new initiatives and products to retain customers.

“That’s probably inevitable at the end of the day that those that are out there competing in an open banking world are going to find other competitors cutting their lunch,” he said.

“Consumers are going to be able to relay their situation to their lender and articulate their needs, and they’re going to be able to throw it out to people to try and come up with tailor-made solutions for them.

“We, like others, will be part of creating these tailor-made solutions but I think there’s still some water to go under the bridge about how that plays out.”

While noting that this evolution could take a few years, Mr Hadley suggested that banks should immediately consider what opportunities this regime could create, including potential partnership opportunities with various players, including mortgage brokers.

“The broker channel is key for the P&N Group. It’s a key part of our strategy in terms of where we invest, and we're starting to understand what that means moving forward, how people will interact with open banking and the broker will be vital,” he said.

“I’m not sure that anyone has all the answers to that at this point in time.”

While highlighting that it remains uncertain how the regime could impact how they service their clients, Mr Hadley said the broker community should consider what the implications could be.

“The consumer will be the one who’s empowered, and therefore they can empower their broker to do whatever it is that they need to do,” Mr Hadley said.

“While there’s likely to be winners and losers, one would hope that it will certainly be the case that consumers are the winners as a result of this.

“But it is very much an uncertain environment and I wouldn’t like to hazard a guess at this point in time [how this could impact brokers] as it’s so conceptual.”

The CDR rules were amended in December 2020 to enable more business customers of banks to use it and share their data with accredited data recipients.

[Related: Open banking ‘a pivotal event’ for mortgage industry: NextGen.Net]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.