As part of a morning dedicated to Creating Opportunities, Fred Schebesta, a founder of Finder, took us through the background to Australia’s CDR and how Finder is capitalising on the opportunity.
New: Now with post-article technical insight from WSO2: A reference architecture to improve capturing & analysing data in open banking flows
Touching on current hot topics, Fred sees screen-scraping as continuing to be useful for the next decade as it fills the gaps for data not available through open banking. ‘Write-access’ CDR, enabling one-click switching, is a key next step and could take Australia to the forefront of this revolution. The Finder app can make this revolution real for Australians, empowering them to connect the dots between their newly available datasets.
Fred didn’t have time to respond to all the questions his talk prompted, but has kindly come back to us with his answers.
Do you think CDR in Australia will mean more competition for the big banks, or will the big banks make the most of the opportunity and win even more customers?
In the long term the big four banks will face more competition from the Consumer Data Right (CDR) as it will unlock more switching among Aussies and allow agile, digital banks to create compelling products and services. However, I think the major banks have an early advantage. They are effectively already accredited, and they have large, loyal customer bases too. I think at least some of the incumbents will use this platform to improve their offerings and win new customers.
How long do you think screen-scraping will continue to be a useful tool around the world as open banking becomes more common?
I think screen scraping will be relevant for a long time, because the open banking frameworks do not include the varied products customers want to see on a personal finance tool. In Australia, data from core banking products like savings accounts, credit cards and home loans look set to be available in the next 12 months, but there isn't currently a timeline to include pension or investment products.
Our users of the Finder app have made it clear they want to see all of these products in one place. Screen-scraping has enabled Finder to offer that today.
I think screen-scraping will exist until every product set is included in every jurisdiction. That could take a decade or more, given the time it takes to get this type of legislation passed.
What do you think the Finder app will look like in 2030?
The Finder app will be the tool people can’t live without. It will be the one application that will sort out your money, invest it, switch products, and transact. It will do everything. Ten years from now, I imagine people will log in to the Finder app using facial recognition technology. Artificial intelligence (AI) will help people with their finances in ways we can’t imagine right now.
I also think our new ‘chance of approval’ feature will be key to unlocking the right products for people before they apply, which will ensure they don’t waste time or energy applying for products they’ll be knocked back for. We just launched this for personal loans in Australia but credit cards and home loans will soon follow.
Are there any discussions around including write-access in CDR or industry movements to voluntarily provide write access to 3rd parties?
There’s a government inquiry going on right now into the future of CDR in Australia, which includes the potential introduction of write-access. This is still in the early stages of policy development so it will be a while before anything is implemented.
What’s exciting is the review is looking at write-access as more than just PSD2-style payment. It looks like account switching could become part of the framework here in Australia. Account switching through CDR would enable one-click account switching for customers across all the categories where CDR is being introduced. That would be a game-changer for competition across the board.
Does the inclusion of utilities and telecoms in CDR give Australia a different approach or any advantages in how you think about open banking?
The cross-sector approach does make the Australian model different. The aim of the CDR in Australia is to take the principles of Open Data to other parts of the economy. While banking is the first cab off the rank, it will then apply to energy which will happen by the end of 2021. It looks like telecoms and superannuation (pensions) will be next after that.
The advantage this brings is it empowers consumers to connect the dots between datasets that they don’t often think about. We see a day where we can pre-warn a customer that their next energy bill could be higher than normal as we can see their energy usage has gone up. This sort of insight will help people stay on top of their finances in a whole new way and ensure they don’t get bill shock, which is even more important now as we face the economic fallout of Covid-19
As data is the critical factor for success, most of the interactions with banks have revealed that capturing of data is actually a challenge. Banks are yet to understand what and how to capture the data. Any views there?
The scale and variety of data in the world today is a challenge for all organisations and not just banks.
One challenge we’ve seen from bank data has been the level of categorisation. This is not included in the CDR rules as they stand, but this categorisation adds real value to the consumer. I expect this to improve. Once this is addressed, both banks and consumers will reap the benefits of Open Data.
Why can’t banks as TPPs use open banking like Finder did?
Finder has been running as a product comparison business for over a decade. We’ve built up one of the most comprehensive product databases in Australia. It’s this product database that allows us to turn transaction data into recommendations, and banks don’t have this kind of information readily available to them yet.
We also have the benefit of being largely product and brand agnostic, so we can give unbiased product comparisons.
What is the big banks view on Open Banking in Australia and what benefit is there to them in participating?
The big banks are legally required to participate from a data holder perspective and they have slowed things down a bit. I do think they are becoming more aware of the benefits though. If they get it right, CDR will help the big banks with their digital transformations. This will enable them to better serve the needs of their customers.
Pre-qualification of products will make the application process more efficient. It will also mean banks can secure higher quality leads, tailoring their marketing communications to customers who are more likely to qualify for a product.
This will also see the rise of personalised offers. Risk-based pricing will see banks tailor interest rates based on a customer’s credit score or risk profile.
...and now for a technical insight from Open Banking World Congress partner WSO2:
A reference architecture to improve capturing & analysing data in open banking flows
As noted very rightly by Fred, adequately capturing the vast amounts of data exchanged between banks and their consumers, and accurately analysing and categorising this data could deliver a lot of new value to consumers. Also, as he notes, this is by no means an easy task.
In each step of the open banking process, from onboarding third party apps (or “client registration”) to consumer authentication and actual consumer data retrieval, there are large sets of data flowing from the consumer to their bank and vice versa. Delivering value added services aside, failing to capture, in a transparent and traceable manner, this vast amount of data as it flows through multiple data flows will only further complicate the task of nurturing trust by consumers in open banking.
The diagram I have set out below sets out a reference architecture for integrating an analytics engine to a bank’s open banking platform to facilitate (a) capturing all the events throughout the multiple open banking data flows, and (b) enabling converting this raw data into categorised and useful rich data using real-time, batch & machine learning-based analytics. Of course, collecting and storing this data alone benefits no one. This enriched data needs to then be presented in well-defined output formats including REST APIs, alerts and dashboards for use by internal teams, partnering fintechs and consumers.
Technical insight by Lalaji Sureshika, Head of R&D at WSO2 Open Banking.