Open Banking and the Consumer Data Right

While most of Australia has been preoccupied by things such as Covid-19 lock-downs, border closures, which contestant got eliminated from Big Brother/Masterchef, and which federal politician went to an NRL game (and depending on which State you live in), the ACCC has implemented the first phase of the Consumer Data Right regime (aka Open Banking).

The TLDR on this new regulation, which has been several years in the making, can be distilled as follows:

Banks can no longer deny customers the right to share their own customer data with third parties.

So, in essence, if I am a customer of Bank A, and I want to transfer my business to Bank B, I have the right to request Bank A to share relevant information about my account to Bank B – Bank A can no longer hold on to or refuse to share that information.

Why does this matter? Well, a major obstacle to competition, customer choice and product innovation has been the past refusal by banks to allow customers to share their own account information with third party providers – i.e., it has been an impediment to  customer switching (and therefore anti-competitive), and a barrier to entry for new market entrants (and therefore a drag on innovation).

Of course, there are some caveats. Data can only be shared with an accredited data recipient, as a means to protect banking security and preserve data privacy. And at first, the CDR will only apply to debit and credit cards, transaction accounts and deposit accounts. But personal loans and mortgages will follow in a few months. (And the CDR is due to be extended to utilities, telcos and insurance in coming years – going further than even the similar UK Open Banking scheme.)

Although I welcome this new provision, it still feels very limited in application and scope. Even one of the Four Pillar banks couldn’t really articulate what it will actually mean for consumers. They also revealed something of a self-serving and defensive tone in a recent opinion piece:

“Based on experience in other markets, initial take up by consumers is likely to be low due to limited awareness and broader sensitivities around data use.”

Despite our fondness for bank-bashing (and the revelations from the recent Royal Commission), Australians are generally seen as being reluctant to switch providers. Either because it’s too hard (something that the CDR is designed to address), or customers are lazy/complacent. In fact, recent evidence suggests existing customers of the big four banks are even more likely to recommend them.

For FinTechs and challenger brands, the costs of complying with some aspects of the CDR are seen as too onerous, and as such, act as another impediment to competition and innovation. Therefore, we will likely see a number of “trusted” intermediaries who will receive customer data on behalf of third party providers – which will no doubt incur other (hidden?) costs for the consumer.

Full competition will come when consumers can simply instruct their existing bank to plug their data into a product or price comparison service, to identify the best offers out there for similar products. (Better still, why not mandate incumbents to notify their existing customers when they have a better or cheaper product available? A number of times I have queried the rate on an existing product, only to be offered a better deal when I suggested I might take my business elsewhere.)

Recently, my bank unilaterally decided to change the brand of my credit card. Instead of showing initiative by offering to transfer my existing subscriptions and direct debits to the new card, the bank simply told me to notify vendors and service providers myself. If I didn’t request the change of card, why am I being put to the inconvenience of updating all my standing orders?

For real innovation, we need banks and other providers to maintain a unified and single view of customer (not a profile organised by individual products or accounts). Moreover, we need a fully self-sovereign digital ID solution, that truly puts the customer in charge and in control of their own data – by enabling customers to decide who, what, when, why and for how long they share data with third parties. For example, why do I still need 100 points of identity with Bank B if I’m already a client of Bank A?

Finally, rather than simply trying to make money from managing our financial assets, banks and others have an opportunity to ensure we are managing our financial data in a more efficient and customer-centric way.

Next week: Counting the cost of Covid19

 

 

 

Cryptopia – The Movie

A quick plug for Torsten Hoffman‘s new documentary, Cryptopia: Bitcoin, Blockchains and the Future of the Internet. After a series of preview screenings around Australia and  New Zealand last last year, the film has its world premiere tonight in Melbourne.

Five years after producing Bitcoin: The End of Money As We Know it, the director has gone back and interviewed a number of key figures who appeared in the last film, to update their stories, and to dig deeper into the whole Blockchain, Bitcoin and crypto narrative.

I haven’t yet seen the latest film, but I first met Torsten when he was screening the previous documentary on the meetup circuit. He was kind enough to show me some early edits of Cryptopia, and I have to say the new content looks very promising.

Given the speed at which Blockchain and Bitcoin markets move (a week in crypto is often referred to as a year in any other asset class), it’s actually important that we stand back and take stock of where we are in this new paradigm for FinTech, decentralisation and distributed ledger technology.

Even if you can’t make it to the Melbourne premiere, look out for Cryptopia the movie as it tours globally.

Next week: Tarantino vs Ritchie

The State of PropTech

Among the many strands of X-Tech that we have come to hear about, PropTech is currently emerging as something of a hot topic, judging by a recent Meetup in Melbourne organised by MessageMedia. With the ambitious goal of exploring the “Past, Present and Future of PropTech in Australia”, it was clear that the field can mean very different things to different audiences.

Facilitated by Bec Martin, the panel comprised Shelli Trung, APAC lead for the Reach PropTech Incubator; Mark Armstrong, CEO of RateMyAgent; Alan Tsen, seed round investor with a focus on disruptive FinTech startups; and Nigel Dalton – ex-REA Group, who also gave a key note address.

Given the format and nature of the discussion, I won’t attribute specific comments to particular individuals. Instead, here are some of the panel’s observations (in no particular order), including some pitfalls for the industry, and key points that all market participants will need to consider.

  • In light of recent events, it was perhaps unsurprising to hear the view expressed that WeWork is “not very prop, not very tech”, as its business model and funding challenges became apparent. Generally, the view was that the co-working space fad has had its day (although Melbourne still manages to support numerous co-working spaces and models, not all like WeWork, since the local demand is there?).
  • We face significant local economic challenges (low inflation leading to minimal GDP growth and negative interest rates; declining wages/purchasing power in real terms; falling retail spending; over-extended household debt; and underemployment in the wider job market).
  • On the other hand, Australia still hasn’t had a recession since 1991, and house prices have just seen the biggest monthly increase since 2003, yet banks are imposing more stringent lending criteria.
  • Depending on which economic theories you favour, this either means easier access for first time buyers thanks to lower interest rates; or more rent arrears, increased mortgage stress and greater homelessness because of a lack of affordability and/or deteriorating lower cost housing options.
  • PropTech is not just two-sided online residential market places (although data analytics and digital marketing capabilities are integral to that particular segment).
  • PropTech should also embrace sustainability in terms of environmental efficiency and affordability. Social impact will likely mean adjusting home owner expectations in terms of dwelling size and carbon footprint. Equally, smart cities and more mixed use development is also being increasingly factored into urban planning and infrastructure design.
  • The increase in higher rise and higher density housing has also led to cost cutting in the choice of materials (flammable cladding), and deregulation and other factors have exacerbated structural defects where there is inadequate insurance protection for home owners.
  • What is happening where PropTech and FinTech intersect, such as the notion of fractional ownership? While this is something that is increasingly more likely (especially with Blockchain technology and tokenisation) if first time buyers have no other way to access the property market, what should be the appropriate licensing regime for these new financial products? What should be the credit risk criteria, lending models, prospectus design, funding structure and tax & accounting treatment? What if such developments include social and inter-generational housing? Or achieve the highest environmental standards/lowest greenhouse emissions?
  • For Australian PropTech startups wanting to go global, there were some warnings about the lack of cross-border tech transfer, and an absence of cultural awareness and curiosity by founders.
  • Meanwhile, on some measure, Facebook is probably the largest residential rental marketplace in the USA. What does that signify for future markets and property transactions?
  • Despite the success of real estate market places in Australia, the model does not easily transfer or scale in other countries. Equally, models from overseas might not work here. There was some scepticism about the so-called “iBuyer” model, and also the agency aggregation approach by firms like Compass (“you can’t buy relationships”). Plus, even local brands can go sour (e.g., Run Property and its subsequent merger with Little Residential to form LITTLE Real Estate).
  • IoT-enabled solutions are a growing theme, especially in aged care, and where AI learning patterns are being applied to energy efficiency, for example, or to improve facilities management (another PropTech segment ripe for disruption). This also links to the use of and intersection between On-line/Off-line data, such as CAD and 3D modelling, and “digital twins” (real-time databases of building design files) for mapping and monitoring physical structures. While in the UK, the concept of, and need for, Digital Twins has led to a raft of industry-wide initiatives and collaboration.
  • Despite Australia’s impressive work in creating standard data structures for residential property, there is still a lack of transparency when it comes to the results of private auctions (but isn’t that the idea – they are “private”?). According to the panel, similar data overseas is considered to be quite “dirty” (unstructured and non-standard).
  • The panel anticipated new PropTech opportunities for those companies offering “high touch/high end” services, and those providing “low touch / high tech” solutions.
  • One common data and infrastructure management challenge is dealing with legacy information systems, and sluggish internet speeds (despite, or because of, the NBN), meaning there will inevitably be some bifurcation in service and quality, depending on building design, purpose, age, location, value etc.
  • Finally, there were concerns that as security data and facial recognition technology becomes increasingly algo-based, it raises questions of privacy and misuse of personal and confidential data.

Next week: Pitch X – Launch Into A New Decade

 

 

An open letter to American Express

Dear American Express,

I have been a loyal customer of yours for around 20 years. (Likewise my significant other.)

I typically pay my monthly statements on time and in full.

I’ve opted for paperless statements.

I pay my annual membership fee.

I even accept the fact that 7-8 times out of 10, I get charged merchant fees for paying by Amex – and in most cases I incur much higher fees than other credit or debit cards.

So, I am very surprised I have not been invited to attend your pop-up Open Air Cinema in Melbourne’s Yarra Park – especially as I live within walking distance.

It’s not like you don’t try to market other offers to me – mostly invitations to increase my credit limit, transfer outstanding balances from other credit cards, or “enjoy” lower interest rates on one-off purchases.

The lack of any offer in relation to the Open Air Cinema just confirms my suspicions that like most financial institutions, you do not really know your customers.

My point is, that you must have so much data on my spending patterns and preferences, from which you should be able to glean my interests such as film, the arts, and entertainment.

A perfect candidate for a pop-up cinema!

Next week: Life After the Royal Commission – Be Careful What You Wish For….