Last week, an important step was taken towards the implementation of open banking, a shift many believe will deliver revolutionary and “long-awaited change” to the Australian financial system.
However, the impact will likely be negligible if action is not taken at both an industry and governmental level, according to Poli Konstantinidis, Experian A/NZ executive GM of credit services and decision analytics.
“There is an immediate need for improvement in consumer education on open banking,” he explained.
“With the introduction of any new banking initiative, the success very much relies on consumer understanding, for them to be able to access and reap the full benefits. This is something that should be done via government and industry investment to ensure that open banking is not only adopted quickly, but implemented effectively. It needs to be a collaborative approach for the innovation to see success.”
Konstantinidis believes that the current information circulating on the topic is not only lacking, but overly complex.
“There are just two key components the education needs to encompass,” he said.
“The first is creating and maintaining trust in the system: helping consumers understand what data is going in the system, who can access it, and how it’s ultimately going to be used. The second is clarifying the benefits consumers will see by participating. Those benefits can be service, products, or pricing-based.
“Consumer awareness remains quite low, which is concerning considering that, ultimately, consumers are the major beneficiaries of data sharing regimes. It helps shape how their personal information is handled, increases user experiences, and helps them apply for mortgages and loans with a more genuine and frictionless process,” Konstantinidis said.
“The need for increased awareness and education is reinforced by our recent studies, both locally and globally.”
Experian research in the UK has revealed that even twelve month after open banking went live, the vast majority of consumers have yet to hear of it, let alone possess any idea of the potential benefits it poses for their finances.
“We can’t expect consumers to accept the new regime without helping them understand how it works and who has access to their data,” said Konstantinidis.
Even beyond a wider distribution of more thorough information regarding the regime, the success of open banking is reliant upon a clearer action path being created and communicated to consumers detailing how to actively participate in the new system.
“Ultimately, the success of CDR relies on consumer adoption. We need customer advocacy, because without them on board, it’s really going to add little value to businesses or their consumers,” he finished.