Broadly, open banking allows customers to share banking data with accredited third parties and allows third parties to develop and market products using that data. Of course, privacy and security concerns remain paramount but open banking is ultimately aimed at encouraging more competition.
“The whole is greater than the sum of its parts” - Aristotle
As New Zealand edges closer to a regulated Consumer Data Right (CDR), in collaboration with the API Centre, we have been learning from overseas rollouts to develop a right-sized, incremental approach to help accelerate that data sharing and good customer outcomes through more open banking.
Our focus hasn’t only been on the development of technical standards but a framework of components that collectively make it easier to work together. I often refer to it as TOP – technical, operational and partnering capabilities.
Recently, discussions have focused on how to enable sharing of data across joint accounts and accounts that require multiple signatories, and how to make it easier to undertake proof of concepts/test-and-learn pilots of third-party services.
Accreditation models overseas have made this extremely difficult with a one-size fits all model requiring third parties to become fully accredited before they can access data to test new ideas and propositions in market with real customers.
The New Zealand proposal doesn’t mean technical testing in sandpits but testing and learning with customers in a controlled way.
Regulations and relationships
At ANZ, the focus has been on developing partnering capability and readiness while developing industry standard Open Banking services. We acknowledge there are different ways to work together. When considering this, I often think about two different pathways – the regulatory approach and the relationship approach.
Looking at how the regulatory approach works overseas, third parties must seek accreditation via a centralised independent process in order to participate in the ecosystem and access data, or use open services offered by banks or data providers. Once accredited and subject to explicit customer approval, third parties will be able to access customer data and services across all participating banks or data providers.
Although no relationship with banks or data providers is required, data access is restricted to the scope of services and rules of participation prescribed by the regulation. This includes:
- The data-sets and attributes that can be accessed
- The services such as payments initiation that can be used and the scope of the service
- The consent process and requirements
- The products and customers that are eligible
- Access rules and performance (in the UK third parties can only call for data a maximum of four times a day)
Any deviation from the prescribed regulatory rules will likely require a commercial arrangement or a change to the scope and/or rules.
Overseas accreditation requirements remain high and can take 6-18 months to process with a cost upwards of $US100,000. Some experts such as Paypers estimate the cost of accreditation in Australia for CDR could reach $US500,000 plus ongoing maintenance of $US50,000 per year.
While New Zealand is moving towards a regulated CDR, we are still some way away from having an accreditation model in place. By working together, we can achieve more than we can individually.
The alternative to the regulatory approach is relationship-based. This provides the opportunity for two-way value, with non-banks benefiting from scale, resources, expertise and customer reach and banks benefiting from the agility, specialisation and innovation of non-banks. This is an exciting prospect that could provide the opportunity to test ideas, work with different data sets, services and access, on different terms that accelerate development and adoption.
ANZ recently worked collaboratively with Spark to test, pilot and launch a service that makes it easier for our customers to manage and pay their bills, resulting in earlier payments and less delinquency for billers. We’re now looking to scale with more billers directly or through third parties. The service provides a strong value proposition for customers, billers, third party aggregators and the bank.
Relationships bring flexibility
A relationship-based approach isn’t a one-size fits all model and can adapt to different scenarios – each offering its own benefits and suitability.
- Third parties are enabled to develop and test their propositions and business models and demonstrate the necessary data security and privacy controls with the potential to build a more aligned or strategic relationship with the bank, if desired. ANZ explored this model when we first piloted the billing proposition with Spark before launching the full service. Spark were initially given the opportunity to approach a limited number of customers to test the proposition.
- Third parties and ANZ offer value to customers together if the bank refers customers to a service to accelerate adoption. A third party will need to have demonstrated a strongly aligned customer value proposition with a proven business model and customer privacy and security controls. ANZ has relationships with a number of third parties whose tools can help customers with payroll, cash management and connecting bank records with their online accounting software. This relationship model enables third parties to offer enhanced products and services to ANZ’s business customers and for customers to benefit from the relationship.
- Third party capability and/or proposition is fully integrated into ANZ’s customer experience and made available to customers. This requires a strong, established and aligned relationship with the bank. It also means non-banks need to meet and comply with ANZ’s obligations as a regulated entity. Often it is appropriate to have tested value and alignment through one of the other relationship models before embarking on full integration.