Open banking

Scott Wall, chief information officer of Melbourne-headquartered mutual bank BankVic, told the IQPC’s Open Banking Virtual Event that customers in Australia have always shown reluctance to change banks because it is difficult to do so.

“If you look at the Australian market, I think 90 per cent of mortgages are still [housed] with the big four banks,” he said during a panel discussion in the webinar.

“I think, you go to any comparison website and look at the rates between the big four and smaller players and other lenders, the big four charge a premium. But people are willing to pay the premium because it’s just so hard to move.”

Mr Wall observed that many Australians open a bank account at their nearest branch when they are young and maintain that account throughout their adult life “because it’s just too difficult to move some things”.

“Also, in Australia, mostly there’s a lot of fee-free banking. So, as long as you’re putting money into the account, you’re not being charged,” he said.

“It’s just easier to leave it there.”

Mr Wall’s comments were made in response to a question by panel member Simon Kirby, director, financial services industry solutions, at data analytics solutions provider Qlik. Mr Kirby asked if the big banks possibly feared losing some of their business to the smaller players and fintechs who may see the open banking regime as an opportunity to adapt and seize some customer share from the major banks.

Mr Wall said that while every bank would be concerned about losing customer share to fintechs, the fintechs have not yet achieved the strong penetration that was originally expected.

“We’ve had fintechs for quite some time now and the penetration is good in some areas, but it’s not what people expected,” he said.

Furthermore, Australian customers are more likely to buy products across multiple banks rather than switch banks altogether.

“We find that most people are multi-banked because people buy products. They don’t buy institutions,” Mr Wall said.

Commenting on whether customers would be receptive of the concept of open banking and sharing data, Mr Wall said Australians have always been early adopters of technology such as contactless payment methods through Apple Pay and Google Pay.

He said customers would embrace open banking once there is more awareness and education around the concept.

“I think it’s up to the players in the market to really push it to their customers,” Mr Wall said.

“As long as the trust is there, I think the services will drive take-up.

“But if you ask Australian consumers today what open banking is, the vast majority wouldn’t even know what it was. They wouldn’t even realise that there was a law in respect to that. They might know about Consumer Data Right (CDR) but, again, probably fairly low numbers.”

“There’s a big education curve for us to go through as a bank to get adoption.”

However, once banks integrate this regime into the services and products they offer, it will become a core element and “just part of the plumbing”, Mr Wall said.

The open banking regime officially began in July with the launch of the CDR, which allows consumers to securely share their banking data to access bespoke financial products and services.

The CDR currently allows data sharing of deposit and transaction accounts, and credit and debit cards.

From 1 November 2020, they will also be able to share data relating to home loans, personal loans and joint accounts.