Until now, the focus has mainly been on transactional banking data, which would allow customers to easily send details of their bank accounts and transactions to fintechs and other financial institutions.
While this is a worthy aim, it’s now time to also turn our attention to the vast opportunities that lie in superannuation and life insurance data.
And by opening up customer access to their data, we’ll be both helping the customer get a better deal and also growing our local fintech industry.
Australia has one of the largest retirement savings industries in the world, with total super assets of over $2.3 trillion. Interestingly, this exceeds bank deposits ($2.1 trillion).
Deloitte has forecast that superannuation balances will reach $9.5 trillion by 2035.
Despite being one of Australia’s largest and fastest growing industries, it is also one the most uncompetitive.
This lack of competition has a number of causes:
- Millions of employees have their default super fund (the fund that receives your contributions if you don’t nominate your preferred fund) dictated by an award rather than a competitive process. The super fund knows that it will continue to receive contributions even if its fees and service propositions remain uncompetitive;
- Members don’t take an active interest in their super fund because they only receive one communication per year;
- Members perceive that it is hard to switch from their default super fund to a more suitable fund; and
- Members find it hard to compare one fund to another because it is hard to find the important information within a multitude of long and boring documents.
In one way or another, these causes all stem from a lack of competition, which hurts consumers. Each year, tens of billions of dollars are taken out of super balances and paid to fund managers and administrators.
Former Australian Treasurer Peter Costello has recently suggested having one national default fund that would achieve economies of scale. While this may bring fees down in the short-term, it does not solve the underlying problem.
Only enhanced competition will encourage innovation, adoption of new technologies, fee reductions and better customer experiences. The key for improved competition is making it easier to compare super funds and switch between them.
Super funds hold a lot of data about their members: balances, tax components of those balances, fees, contribution history, asset allocation and age.
Fintech businesses such as Plenty Wealth have already taken large strides towards using this type of information to provide instantaneous advice on switching to a more suitable super fund, and then making the process both fast and painless.
This information can also be used to optimise contributions, investments and superannuation tax strategies.
The problem is that collecting this data remains a barrier to many consumers using such services.
Open superannuation data would overcome this problem. With open data, digital advice businesses and competing super funds would have complete access to all the information required to assist consumers in doing more with their super. Consumers could then set the wheels in motion with a few mouse clicks.
We should also keep in mind that super doesn’t exist in in isolation. Most members have life insurance benefits intertwined with super. If they switch funds then they will lose their insurance and may not be able to get it back.
Therefore, to get the best results from opening up super fund data, we will need open life insurance data as well.
Open superannuation and insurance data will create more competition, reduce fees, enhance innovation and deliver better customer experiences.
The current inefficiencies of the superannuation system will continue until we make it easy for consumers to easily access their data and share it with organisations that can use that data for the benefit of those consumers.
Greg Einfeld is the principal of Lime Actuarial and co-founder of Plenty Wealth.
Australia's fintech community and the Victorian government have come together to hold Australia's first fintech festival – Intersekt – in Melbourne from 27 October to 3 November 2017. Fintech Business is an Intersekt media partner. For more information, visit www.intersektfestival.com.
Panels will discuss open data and superannuation issues across 2-3 November at the Collab/Collide summit, which is part of the Intersekt fintech festival.
