The government set new deadlines for Australia’s open banking regime, set aside millions in the budget for funding broader ‘Consumer Data Right’ measures, and announced that they will hire a national data commissioner.
All this occurred in the shadow of data security concerns, and debates around the nuances of comprehensive credit reporting.
Understandably, many financial services organisations have been left wondering how they can keep pace.
As regulators across Australia are increasingly looking to empower consumers and service providers to better use financial data while safeguarding it, here are the key take-outs for fintechs in an era of increased data sharing.
Open data cannot lose focus on security
Greater data sharing – especially in a financial context – leads to greater competition and delivers better value to consumers.
The realisation of these successes is enhanced by taking advantage of recent overseas experiences. It is vital that client data remains protected.
Experian’s recent Digital Consumer Insights report found that 18 per cent of consumers in the APAC region are already experiencing fraud.
Additionally, almost half of Australians (49 per cent) are likely to switch or cancel a bank service in the instance of fraud, highlighting that for regulators and institutions, implementing and enforcing appropriate security measures is crucial.
If data breach risks are high, consumer confidence suffers, and participation in the data sharing process is lost.
To protect sensitive or vulnerable transactional data, a successful open banking framework must award equal consideration to technical efficacy and security of data transfer processes and protocols.
Only then can regulators across Australia empower consumers and service providers to better use financial data – while safeguarding it.
Sharing complete data sets is imperative
At present, one of the best ways fintechs can protect their customers is by leveraging high-quality customer data to effectively verify transactions.
However, this is easier said than done – consumers are often selective in the type of information they are willing to share with companies, and are clear on how they would want the data to be used.
For example, less than half (41 per cent) of Australian consumers are willing to have their personal data shared with businesses specifically for better fraud detection.
Furthermore, 5 per cent of APAC consumers said they have intentionally submitted inaccurate information to avoid disclosing personal data, while 20 per cent have made mistakes in the details they provided to businesses.
These statistics signal that companies might be working with wrong, unclean, or inaccurate data. As a result, there is onus (and opportunity) for fintechs to communicate the value to consumers of sharing data in order to increase data quality while at the same time investing in technology to improve data quality.
What can we learn from abroad?
Australia is not alone in embracing open data: in January this year, Singapore set out directions for data sharing among government agencies, a recent study in Britain highlighted benefits of sharing patient’s health records and in the US, a federal open data portal is slowly but surely growing in popularity.
If we consider open banking as a blueprint for a new data economy, there are overseas examples to assess as we consider legislation in Australia.
For example, the UK’s rush to meet regulatory deadlines left consumer education lacking, and consequently, adoption and innovation trailed behind expectations.
There was also an initial deterioration in customer experience driven by additional risk and compliance requirements as a result of the changes.
Solid understanding about who accesses the data, and how it’s accessed, is imperative to build and maintain trust in the system.
The federal government’s advances in open data frameworks last month hopefully signals a commitment to clarifying these processes for all parties, and dedication to a smooth road ahead for the open data revolution.
A timeline that balances deployment urgency with the depth of the solution, and ensures the creation of value-added services is crucial.
Steve Philpotts is general manager for data quality and targeting, Australia and New Zealand, at Experian.