After initial reluctance, the big four are now making their moves as the scheme sets to take off – now on board with giving its customers control over their everyday banking data.

The new open banking scheme is obviously a no-brainer for customers and fintech start-ups. For customers, it empowers them to seek out better and more agile services.

For start-ups, it lowers the barriers to entry, and makes it easier for them to further disrupt the banks ever-diminishing touch points with the customer.

One thing we know for sure, is that the scheme is guaranteed to shake up competition, perhaps most significantly in the consumer lending market.

Although the regulation is new, the concept of distributing customer’s financial data is not. Companies using screen scraper software have already been around for years, disintermediating banks by reproducing bank hosted customer data resurfaced in (non-bank supported) mobile apps that deal directly with the consumer.

While this requires people to share their most sensitive personal data (username and password) with a seemingly untrusted third party – the fact is that 2.2 million (and growing) Australians are comfortable to do so.

If it continues to be embraced by banks the scheme can build bridges between banks and fintechs to solve real customer solutions.

If banks open data with trusted partners, there will be strong growth opportunities across multiple industries. In fact, in Europe those banks that acted prior to regulatory signals (the stick), have been recognising returns for some time now, with fintech start-ups, banks and consumers, all benefiting.

This is the ‘carrot’ model we should progress in Australia to avoid the costly compliance project that may otherwise be upon us.

If banks can proactively co-establish a secure, automated customer consent framework to share data in the interest of the customer, it can transcend the boundaries of what traditional bricks and mortar financial institutions are renowned for, and would have the power to remove the points of friction in our daily lives.

This could be as simple as proactively pre-approving overdraft facilities via more complete risk scoring for small business customers, to accurately pre-populating personal income tax returns.

Despite the fact that the scheme is still in its early days, banks should be far from sitting on their hands in anticipation.

Open data should already be playing a substantial role in banking strategy (at the group level, not just digital) if they want to thrive alongside fintech disruptors who will benefit from these regulations.

There are initiatives with benefits in the near term that can be realised now if banks start moving with what Versent describes as ‘no regrets’ work. For example, ANZ Bank – a Versent customer – has already started by exploring what APIs can mean in real terms for the customer.

Under an open banking standard, it is expected that Australian banks will need to develop and build APIs to securely share customer information. One key challenge will be for the industry to avoid repeating the complex integration and security mistakes of the past.

That is, to resist the urge to over architect and over govern the implementation. Only then will they be able to successfully create a great developer experience, which in turn leads to a great customer experience. Get this right and we could create the step-change our economy so desperately needs.

There’s a long way to go before we are operating in a true sharing economy, powered by API, but Australian financial institutions should embrace the opportunity to get a head start, if they haven’t already.

The open banking regulation should be seen as a great opportunity, with banks, start-ups and consumers to all benefit in the long run.  

Joel Wermut is the practice director for API and Microservices at Versent.