Open Banking: “If you want to go fast, go alone. If you want to go far, go together.”
African proverb
Open Banking will empower customers with more choice, control and transparency over sharing their financial data with other parties. It is the first step NZ is taking towards a likely broader reaching Open Finance and Open Data economy.
Open Banking has the potential to dramatically change the financial services landscape. It reduces barriers to entry and provides the opportunity for Banks and other parties to work together openly, utilising collective capabilities and advantages to create new customer propositions. It may also help address financial and digital literacy and inclusion.
Unlike in the UK, Australia and other countries, NZ has a unique opportunity to do this ahead of any regulation, potentially keeping big overseas players at bay for a few years and opening up the opportunity for home grown Kiwi innovation. Think TradeMe and eBay.
There are many different ways we could work together to create a sustainable open ecosystem that delivers benefits for consumers and NZ Inc. As we continue to work towards an Open Banking ecosystem for 21st century banking, I’m reminded of this African proverb a lot:
“If you want to go fast, go alone. If you want to go far, go together.”
If we can learn anything from overseas it is that creating an Open ecosystem takes time, is complex, costly and there isn’t a perfect model to follow. There is also a growing acknowledgement, appreciation and convergence of differing perspectives and the capabilities of Banks and FinTech. Banks, who’ve built and sustained a trusted, safe and secure financial services ecosystem through strong risk management practices and a measured approach versus a Fintech’s agility, speed and need to disrupt.
To be successful, Open Banking must enable an ecosystem of shared services and value propositions that are consistent, trusted and easy to understand by users. This is no small task. While not Open Banking, I often use Direct Debit or EFTPOS as examples to highlight the collective effort required from many different parties across technical, operational and commercial aspects to develop, consume and to operate these types of services.
In my role I have the privilege of working with the Financial and Fintech community to help shape the NZ ecosystem through the API Centre, Digital Identity NZ and by meeting and working with up and coming entrepreneurs and start-ups who are developing new and exciting customer propositions.
Here are a few of the key questions I always ask:
1. What is the value proposition?
It’s important you’re clear on your value proposition - what is the value you’re providing to the consumer? How is this different to what they experience today? Can you demonstrate how you have or will validate the proposition?
If you want to leverage capability and/or investment from Banks it is helpful for you to consider how your proposition could benefit or be accelerated by working together and leveraging the Bank’s capabilities, trust, engagement and distribution.
2. How will you protect customer privacy?
We’re dealing with people’s personal information so it’s vital we protect customer privacy. You will need to demonstrate you can keep customer data safe and secure. Your data security, governance and risk management needs to meet banking industry standards.
It’s important you consider operational risk early and continuously through your product development lifecycle and how you will tackle risk incrementally. Try not to run before you can walk, you will need to earn customer trust overtime.
Banks have proven delivery and risk management practices and we can help work through this together. In some cases, making simple design changes upfront can minimise risk exposure for all parties and ensure a faster pathway to market.
3. What are the key assumptions that underpin the business model?
To be successful you will need both a strong customer proposition and a sustainable business model. Understanding and validating the assumptions behind your business model early is just as important as validating your customer proposition. What is your pathway to market? What data/services does your proposition need? When will these be available? What will you need to demonstrate in order to access these services? What other data/services could you use to enhance your proposition?
It is still early days for the Open Banking/Data ecosystem in NZ with many opportunities ahead and questions to be answered. By working together, we can better understand the different perspectives and challenges, test ideas, solve common problems and potentially develop stronger value propositions and outcomes for all.
So while we could all go alone, I believe going together is where the magic will happen. It may take longer, require more rigor than expected, and require compromises but once we’ve all earnt the trust of users, opportunities for further collaboration will grow and accelerate.
Article is an opinion piece by Jody Bullen, Digital Lead - Data & Open Banking ANZ
Join Jody on Friday 28 May for a Techweek TV session: Building an ecosystem for 21 century banking